I just got my 2012 Prius III about 2 weeks ago. I am also having strange problems with both my ipod and iphone. I have only used my ipod one time and I had the same problems as the OP described with the pausing. I have an older 160gb classic. Mine is 99% full with over 50,000 songs. The problem I am having with my iphone (happens about 1 out of 10 times) is that when I attach it to the usb cable the music will play out of the iphones speakers not the cars speakers but artwork will display on the nav screen as if it was playing out of the car. The only thing that seems to work to switch it back over to the car vs the iphones speakers is to make a phone call using the BT. Once when I was having the problem I was right down the street from a dealer. They told me they have never seen it happen before (of course) and that I would have to leave the car and my phone all day. Since I had an appointment the next day at my regular dealer for them to disable my reverse beep and a few other things, I asked them to check the radio and of course they couldn't find anything wrong and could not duplicate the problem.