I've got an '01 Beetle with an aftermarket Sony Xplode in it.
I installed it myself and it was pretty straightforward. I had to remove the Monsoon system but never got any kind of check engine light from doing it.
It's got an aux input that I ran 1/8" plug to twin RCA jacks into the stereo. Before I had the carputer, I ran the iPod on it, no worries.
In many cases, there is an adaptor cable you can buy that plugs into the car stereo harness and then adapts to your radio. Crutchfield sells them, I know. Also, the bezel around the radio is an aftermarket purchase because of the curved shape of the dash. Can't remember where I found it but a little Googling will probably do it for you.
Also, check out Newbeetle.org for some forums that discuss different issues with the stereos.