I agree with A1cntrler, the best thing you can do is to either obtain a new headunit that will accept RCA input, or purchase a harness that will allow you to hook up via RCA inputs into the auxiliary port (CD changer controls) of your factory radio. Something similar to this harness: <a href='http://www.xmfanstore.com/showproduct.php?id=pieoem'>http://www.xmfanstore.com/showproduct.php?id=pieoem</a>
The next best thing would be the cassette adapter method, in my opinion it provides a little better fidelity than an FM modulator. This is the current method I am using and has served me well for over a year now until I make the move to upgrade my factory headunit to an aftermarket that will have RCA inputs built in. Here is a link to the project I did to install my XM radio: <a href='http://www.mysporttrac.com/mysporttrac/projects/Sat_Receiver_Install.pdf'>XM Installation 2</a>
The FM modulator is not a bad approach. The main thing you need to do is ensure that you pick a relatively broadcast free channel in your area. In my area it is kind of tough as it seems there is a broadcast on most channels, and often these signals leach over into my 'unused' channel. The other thing to do is if your XM radio has the option to set both the Line out and FM modulator signal output level, make sure that the FM modulator is adjusted so that the signal is at the same level as say your CD or other FM stations, in my case the highest sinal output works best if I use the FM modulator.
By the way, what kind of XM radio did you receive?