I know this is an X5 forum, but just wanted to mention that I am having the exact same 'drop to AUX' problem in my 325i. I found this thread doing a search on the problem. Since one poster mentioned that a new module did not fix the problem, I wonder if the problem lies elsewhere. Bad cable between module and ipod? Bad adapter connection??? Something unique in our use of the iPod?? Too many variable, unfortunately.