That dial affects only face vents. When it's fully red the air coming from the face vents is the same as from every other vent. When you turn the dial towards blue cold air passing the heater core is mixed to face vents. You can keep it all the time on red to make it work like on every other vehicle. Never had a problem with this when you know how it's functioning. Though I have to admit I have to use it more often on E53 compared to E39. Could be partly for the larger window area affecting the feel of air warmth depending on weather. I almost never touch the temp setting. It's constantly on 21,5 C. When needed I just use the dial.

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E39 530dA -02 M-Sport Messing metallic
E53 X5 3.0dA -06 Sport Stratus grey
E70 X5 40d -12 M-Sport Space grey