Too many ney-sayers on these forums. If your passionate about it then you should pursue it.
No kidding. I'm dissapointed in most of the posts here. Here's a young person in high school with a creative idea looking for feedback in one of the best places in the world for such feedback. He never said he was banking his life savings and entire career on the project.
I think this is a GREAT idea for a school project. Of course there are FCC/government/legal concerns. Of course there are implementation issues. Of course there are questions about who would fund it (it usually ends up being a burden carried by the consumer one way or another anyway). I would think merely acknowledging that those obstacles exist would go a long way toward getting a good grade from a reasonable teacher. High school is about teaching thought processes and basic life skills, not solving all the worlds problems. Okay, I'll get off my soapbox now.
Personally, I wouldn't want the government mandating that every radio or car manufactured after Jan. 1, 2XXX, have this proposed device, but there are more than a few government officials who would gladly lend their ear to some sort of proposal. It doesn't have to be mandated anyway. You could argue there is a potential market of safety-concious drivers who might want it. There is certainly a problem to be solved from the public safety perspective. This alternative solution was just posted on Fox News today:
http://www.foxnews.com/wires/2008Nov12/0,4670,HowlerSirens,00.html. In my opinion your device is more flexible and could also have uses at railroad crossings, construction sites, rock slides, drawbridges, accident scenes, roads prone to flooding, etc.
Rather than modifying an in-car radio and taking the teacher for a ride, why not just go through your old parts in the garage or pick up some off E-Bay? For a good classroom demonstration of your concept, you would just need a 12V power supply, a cheapie radio, and a set of speakers in addition to your invention. It's just a prototype. Your parts could be packaged in a project box from Frys or Radio Shack or even a shoebox for that matter. I like the idea of using some pre-made transmitter like an FRS radio, or even a kid's walkie talkie. Surely it doesn't have to operate on the exact frequency of the "officially" proposed device. Also consider infrared or something more directional (could be pointed at cars in the way rather than just a "broadcast"). As other posters mentioned people obviously listen to so many other things besides AM/FM like iPods, XM, movies, etc., so your device would need to be inserted near the sound output of the radio. Also consider many radios have line-level outputs connected to an external amplifier so delays and volume will need to be considered. I can't help with more technical details, but you obviously need a receiver to trip some sort of interrupt like a DPDT relay to play your alarm or "recorded" message. A simple mp3 player or casette player enclosed in your magic box might suffice for your prototype. The whole thing minus an antenna could be miniaturized with today's technology to sit in the palm of your hand, but your prototype shouldn't have to be that small or even pretty for that matter.
Good luck!