Probably the closest thing right now is the recently introduced Delphi Roady 2, an iPod sized receiver that includes an FM transmitter. You would have to bundle it with a traditional Walkman-like product.
And, of course, there'd be the problem of the required antenna. You'd problably wind up with something similar to the previously mentioned boombox.
Thanks for the info on the Delphi Roady2; I'll have to check that out.