[mscot]

Dreg, our passat has the usb connector instead of the ipod connector and it can read my 15gb thumb drive with no problems.
Cass I'll see if my 2010 can read a SDHC when I get back in town next week.

 

[mscot]

You can hook up an external in the glove box if you want. It just requires the usb adapter. I think 1TB would be a bit much though. I have a decent collection of music and it's probably only half that and I wouldn't want access to EVERYTHING anyway.
You could always just buy a used or refurbed Ipod as well.