The portable GPS unit is connected via the cradle to the HU via a few cables. in addition, the GPS unit needs to be coded to the car with a VO in order for the HU to be able to pick up the navigation/voice data from the GPS when needed. But since you mentioned that the HU will attempt to mute the radio/CD it means the coding is done properly already.
My suggestion is that you try to clean the connector pads on the GPS unit itself as well to check and make sure that the pins on the cradle are straight and none are broken. The first few pins on the left side of the cradle (and corresponding connections on the GPS unit) controls the voice data connection to the HU. 1 poor or broken connection can cause the problem you are facing.
One easy way to solve the problem is to tape up the first 4 or 5 pins on the GPS unit itself using a piece of duct tape. This will prevent the GPS unit from detecting the connection to the cradle and continue to project the sound through it's own speaker(s). However as not all the pins are blocked, the charging of the GPS will will be as per normal.
This is what I did after I did my bluetooth phone retrofit as removing the coding of the GPS from the car did not solve the problem of the sound output from GPS being muted. I had even removed the wiring from the GPS cradle to the HU but still did not have any sound. My guess is that the GPS will detect the cradle pins and send the sound output through there regardless of whether the pins are actually connected to the HU or not.
