On every startup playback from ipod is started over to the first song on the ipod. Is there a way for it to continue playing from the point at shutdown? It obviously recognizes it because it shows for the instant before it starts playing.

Your ipod is probably too old for the firmware in the 8100. I had the same issue when I upgraded from my u310BT to the NEX5000. Ipod played fine in the old unit, but in the new one, it would always start from the very first song. It's extremely annoying. You can try checking for a new firmware update for your ipod, but I ended up having to use a newer ipod. I had an ipod video and a friend swapped his ipod classic with me, which worked fine. Another option would be to try to find an old, unused iphone and just use that as an ipod for the car. 

Your ipod is a 5th or previous generation.   The 6th (classic) and 7th (classic 160GB) generations resume fine.