I've used both wireless and hardwired FM modulators in my TB and honestly I didn't like either.
Wireless isn't that great for obvious reasons, and the hardwired one was just too much of a hack for my liking (plus as stated before, quality is only as good as FM radio).
I finally got an Alpine CDE-W235BT (for $130-something from Crutchfield) and couldn't be happier.
It has Bluetooth, CD, aux input, USB input, and even a clock.
Bluetooth quality from my phone is nearly as flawless as having the aux cable plugged in, and the external mic sounds great according to the people I have called on it.
I will vouch for getting a new head unit any day of the week.
My buddy has a Blazer and decided to buy all kinds of the PAC-AAI units or whatever they're called to add aux inputs and RCA outputs, and the audio quality is still mediocre at best, yet he's paid nearly as much as I did for a whole new head unit.
Another benefit of a new head unit is you get a chime with a volume adjustment. That sold me on it, honestly.
The OEM chime is just waaaay too loud.