Easy boss. I think you read some of that wrong. I have the DPX-701 with USB, and it's actually more limited than you think. I'm shopping around for a hard drive for it and the options are few.
The software that comes with the HU is the PhatNoise Media Manager. It goes on your PC, not you mp3 device. The software uses aac encoding in order for voice prompts to be created and the HU to be able to read it as well as some of the proper files it copies on to your device so the HU can see read the prompts. Next, what you don't find out, unfortunately, until you get the HU and read the manual (i.e., download manual from Crutchfield before you purchase!) you find out that only flash drives with no more than 30gb will work, period. This isn't a plug/play usb port. The reasons behind this is first, the device must be a flash drive formated in FAT. Anything larger than that is formated in NTFS and you cannot re-format to FAT, I've tried, it's just not possible (windows does not support it). I tried everything with my 512mb thumb drive and it worked like a charm.
Next, you have to be sure that your device can run on 500ma. I'm sure your device can, but it's not enough to charge it from the HU, that's just enough power to run it as the external device. Most external devices need 650ma, and the USB port on the Kenwood HU's don't put out that much.
All this comes from much frustration in trying to get my 100gb external drive to work with my HU.
If you have any other questions, let me know. I'll be happy to help