It is built in to the armrest so you don't need leads (as far as I'm aware). You just put the Ipod in a slot and it links in to the audio system. I just don't know if a Nano would fit in the slot or whether I need the older larger size. I don't have access to the car to check as it will be a gift.
It is a factory fitted option, I have a Mark 5 GTI with the armrest ipod connection. I would imagine it's the first click wheel model - the 4G. I have a 3G model and a 5G model. The 3G does not work and the 5G does. Don't quote me on the 4G though, but 3G or before forget it.
Sorry I reread and saw it was a nano you have. It will definitely work. I just checked the manual. Apparently the 3G should work too but mine doesn't. Oh well. The golf has a pack of adapters to fit the ipods. Make sure you receive them all.