If you set the radio function to CD and connect the Ipod with the connector to AUX connection, this should work. (Works on 2008 audi, could be different for VW).
Is there a button on your radio that says "AUX"? On my Skoda it has to be set to Auxillary or else it wont work. It should say "Auxillary On" on the screen. Thats what the Skoda does anyway, they should be fairly similar.