That's correct. You will not be able to use your iPhone/iPod as a portable HD in that way. Apple's devices are not designed for moving music from one device to another. In fact, they are expressly designed to NOT permit that. The reasons are beyond the scope of this discussion.
There are essentially 3 types of music files you will be dealing with in your iTunes library, and the type will determine how/if you can move it to the Jeep's HDD:
1. Music that you've imported from physical CDs. This is unprotected (non-DRM) content. You can move it around at will and copy it to other devices without any technical restrictions.
2. Purchased music from iTunes that does not contain DRM. This is a fairly recent change at the iTunes store, and it makes these music files movable as with Type 1 above.
Moving Type 1 & 2 music files: My recommendation is to organize your playlists within iTunes and then work from that to move the playlists into folders you've created on a portable USB storage device such as a flash (thumb or jump) drive. Some members have used larger USB drives but have reported some issues possibly related to exceeding a certain limit of files. I have been using the naming convention [artistname]dash[albumname] for my folders as this works well with the 430n's "Folder" organization option. I have also heard that some members are simply dropping loose song files into the 430n w/o any type of organization, and the built-in Gracenote database is grouping them automatically. This is a personal preference but I would make myself commit ritual seppuku if I ever did anything that cavalier with my technology.
3. DRM-protected music (ex: older music that has been purchased from the iTunes store). These files will not play in their native file type (.m4p) on the media center's HDD. One way to strip DRM from this type of music file is to create a playlist in iTunes and then burn that playlist to a CD. The files on that CD can then be re-imported to iTunes sans DRM. There are other methods for stripping out DRM but this is the most straightforward IMO. Once the music is DRM-free, it can be organized and moved the same as Types 1 & 2 above.
You can also feed CDs one at a time into the HDD's slot, but this is by far the slowest method on a song-by-song basis. The upside is that at least currently, this seems to be the only way to preserve album art for each CD you load.
Note on music file formats: There are a variety of file formats that offer different benefits. Unless you are an audiophile, you are probably mainly interested in getting as many songs as possible onto your HDD as efficiently as possible. IMO, AAC format is a good format that yields good-sounding playback and a small size (3-4 MB per song). iTunes offers good Help files for describing the how-to's of converting your music if needed.
I will ask other members to chime in if I've left anything out or misspoken, or if they have other best practices they can share.