High quality portable server/player/dac for car

Folks - I wonder if any of you can point me in the right direction.

I'm struggling with the quality of audio/interface I can get in my car - I've a BMW with the Harmon Kardon "upgrade". I can attach my iPhone via either the lightening, line out or bluetooth connections but a) none of these sound that great, and b) I can only get a fraction of my library on such devices. Alternatively I can use a 1TB drive connected via USB  with my library on which sounds a bit better (though still disappointing), however the car's library management, search functionality and idea of random leave an awful lot to be desired. So much so that it rarely gets used.

It could well be that the car system as a whole isn't that great and there's nowt to be done other than either live with it or look at wholesale replacement (which I'd really really rather avoid), but I suspect there's a gain to be had by bypassing the car's DAC and library management by having a high quality, line level, device connected via the 3.5mm jack. I'll try to come up with some way of testing my hypothesis prior to purchase but assuming this is the case.....What type of device should I be looking at?

My first thought is a high end portable player but I've no need for an amplifier or most of the features that these come with. Are there such things as portable sources that 1) have decent storage (about 500gb), b) library management, and c) high quality dac and line level output?

I do have a pair of LCD3's and GS1000 so there's a slim chance that I might use the additional functionality of an A&K/Cowon type unit but ideally I'd like a solution where all the £££ go into improving the SQ in the car. I wouldn't want to part with more than £1k or so but no need to go mad/overboard - inky black backgrounds and channel separation might go unnoticed driving down pot hole ridden roads with kids screaming in the back!!!
It is doubtful to me that the 3.5mm input would be any better quality than the systems DAC.Depending on how old the system is I would look at speakers first,then head unit...JMO,YMMV...
Thanks freediver - I should have said that the car is fairly new - c. 2 years. I suspect that you may be correct and I'll definitely test the 3.5mm with a high quality input before making any purchase. My suspicions re. the DAC come from a feeling that it generally sounds better via FM than uncompressed FLAC/WAV from the hardrive - obviously a very difficult thing to A/B test though so could be some prejudice creeping in from me.

All the best
I agree with freedliver.  Why not try using a portable like Astell And Kern and controlling from the player interface and skipping the Beemer control mechanism?
Thanks Guys. I've had a play and my conclusion is that the HK "upgrade" isn't up to much - be that via HQ portable or using the car's DAC. I've no real desire to upgrade the whole car system so I'll probably look at a portable with decent library management and not overly worry about its SQ.

Astell & Kern for sure.