If the flipout monitor has a USB touchscreen and a VGA input, then yes. You can do anything. Hence the CarPC. The touchscreen works like a mouse. Anything you can do on your computer right now with your mouse, you can do with your finger.
There are programs called frontends (there is an entire subforum dedicated to most of them) that make big buttons and interface with music/video players so that you aren't messing around with little x's and everything while driving.
I suggest you look over the newbie forum's stickies. They have answers to a lot of common questions to get you off the ground.