My understanding is this:

SDMI isn't relevant to the car player, because music is copied to it from a PC, not from another digital audio device. This process is specifically excluded from SDMI regulations by the Home Recording Act. Since the car player cannot be used as a source for digital audio recording (at least, not with any software that we supply) this isn't a problem either.

In any case, SDMI is a legal issue which affected empeg in exactly the same way as S3.

Rob