iPod connector car control
The iPod normally uses USB, Firewire, or serial when talking to other devices, like your car.  Pin 21 is used by the iPod to detect what it's plugged into, not by the car to detect when the iPod is connected.  We simply don't know what will happen when Pin 21 is disconnected, but I'll make an educated guess and say that it won't make a bit of difference.  

Odds are that your car uses the USB port to talk with your iPod, and detect that the iPod is present.  If you disable the USB port (by clipping the wires, for example) the car won't detect that the iPod is present, and thus not enable the iPod as a valid audio input.  In short, it probably won't work.

I used to have a car with an iPod dock.  When connected, the iPod controls were disabled, like yours, and the car's controls were absolutely terrible to the point of being unusable.  So I feel your pain.  Now, I won't ever buy a car or car stereo with a device specific MP3 player connection-- just a standard "AUX In" for me.