Is it possible for the HTC phone to interupt the music when I receive a call

Returning to this question several years later, it's still a pretty sad state of affairs. The only reliable answer is some sort of hardware solution.

In practice, this is what I ended up buying:

http://www.amazon.co.uk/Olympus-TP-8-Telephone-Pick-Microphone/dp/B007OXMHDE/ref=sr_1_11?ie=UTF8&qid=1400147804&sr=8-11&keywords=voice+recorder+microphone

It works really well; you connect the jack to a voice recorder and put the earbud in your ear, which has a microphone and sits between your ear and the phone's speaker. The quality isn't bad (albeit not broadcast quality) and the ability to use an external voice recorder means I'm not having to deal with moving files off my phone or expend extra battery power on a recording app.

That said, this looks really interesting (Though I'm unsure whether you just connect it to your phone and use normally, or whether you connect some sort of hands-free headset to the other side):

http://thenextweb.com/gadgets/2014/05/12/15-quirky-gadgets-accessories-buy-today-2/2/

Considering the question is ultimately about finding a cheap or free software-based recording solution, I'll leave it open in case anyone comes up with something workable.

On a jailbroken iPhone, with SBProfiles and SBSettings you can utilise profiles to group multiple actions to different situations. The downside is that you have to manually switch the profiles when entering and leaving the car.

1. Make sure you have SBProfiles and SBSettings installed from Cydia.

2. Open SBProfiles. It should have multiple profiles by default; Default and Car among them. Select Car and then Toggles. Drag Airplane and Bluetooth to On section. Make sure that Airplane is on top of Bluetooth, otherwise activation of Airplane will turn Bluetooth back off.

3. Then, go back to Car and select Done from the top bar. Select Default and then Toggles. Drag Airplane to Off section (and Bluetooth, if you don't need it outside the car).

4. Select Settings from the bottom tabs. Select Activation Method(s) under Profile Switching. Here you can select the action(s) that trigger the profile selection to become active. I think it defaults to Short Hold of the Sleep Button.

Now, when you hold the Sleep Button a bit longer than shutting down the screen but not long enough to power off the iPhone, you can select Car profile and have cellular turned on but Bluetooth on. Or select Default to turn cellular back on. I think you will have to make the call still, unless there's a way to automate it, too.