Thanks for the inputs.
I finally got a 2GB Nano on hand, plugged it in, the deck reads everything on the iPOD even shows the status of playing.
But I'm not getting any sound at all. On the iPOD side, it reads the unit is connected to the Pioneer head no problem. This is why I posted because I have heard CD-IB100 is not compatible with Nanos, but if 4GB works then why wouldn't 2GB does the same?