Everything everyone else has said here on this thread is correct, but being the proud owner of both a Mk1 and a Mk2 unit, I wanted to bring up a few additional points:
1) The internal shock mounts for the hard drives on the Mk2 are better. I believe they are more reliable in the long term.
2) The circuit board has gone through several revisions of improvements on the Mk2. For instance: My Mk1 was number 144, and there was a jumper on the motherboard which protruded far enough to damage the hard disk drive cable (but only after months and months of mild friction). When I discovered the problem, I was able to fix it fairly easily, but I could see how it eventually might have made the cable fail.
3) There's more room inside the Mk2's case for the drive tray to move and the drive cables to route. This makes for more overall reliability, I believe.
4) The car docking connector on the Mk2 seems to be more reliable than the one on the Mk1. My Mk1's docking connector required alcohol-and-qtip maintenance regularly to keep things working properly.
5) The Mk1's sled had a tendency to "bind up" on the side-mounted guide dimples after several months of use. The Mk2 fixes that problem as well.
6) The audio outputs on the Mk2 are significantly improved. Depending on the complexity of your installation, you may find that the Mk1's differential outputs give a greater chance for ground loops to develop and it's harder to troubleshoot your installation.
7) The Mk2's rotary knob is much more convenient for controlling the volume than the buttons on the Mk1 faceplate.
Don't get me wrong, the Mk1 is a great unit. If you really can't afford a Rio Car, then it's very useful and still performs its primary task (playing your whole CD collection) perfectly. I just wanted to point out some of technical issues that had been solved on the Mk2 units.
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Tony Fabris