Upgrading speakers with stock radio

No, you don't need to change the head unit if you install new speakers. However, just because a speaker is rated for 40w or more doesn't mean that you have to have a receiver that will output the max rated wattage for the connected speakers.

Upgrading speakers is not about maxing out the system, but it is about finding speakers that sound good to you for the type(s) of music that you listen to. It is all about personal taste.

Opinion alert!
Stereo shop employees tend to be the type that max out systems to the point that it doesn't matter what they have done to the system, nothing sounds good on it because the system is all electronic flash-bang with no real substance for reproducing the music. The system is large and loud, but large and loud rarely reproduces music well. I'm sure we are all familiar with the kid in the neighborhood with a car stereo which rattles the license plates. I wouldn't call that accurate sound reproduction.

So, just for academic purposes, not factual ones, that the standard Prius stereo outputs 20w per channel. And you put in a 40w peak speaker. There is no possible way that you could blow the speaker you put in because its rating is so much higher than the output of the stereo. Yes, this is highly oversimplified and doesn't take into account the multiple speakers per channel on the Prius, etc.

As for iPod interfaces to the Prius, I haven't heard of too many that work well with the Prius stereo system. That is why the 06 JBL stereo has an aux input. Please do some searches of the site and I'm sure you will find some very interesting threads that point toward a good iPod interface for the Prius or what others have done to integrate their iPod.

This is my bias, but I'm not one to tear into new cars to replace speakers etc. One of the reasons I buy new cars vs. used (amongst many reasons) is so that I can make choices about how the new car comes equipped so that I can get better stereos and such from the factory, within my budget, of course.