If you take a look at page 12 of this document you will see that there is more then just a common audio cable connection involved. The circuitry, comprised of some resistors and capacitors, isn't complex but needs to be there for the AUX to work properly and for the head unit to detect that it is present. Also note that only radio modules 2003 and newer support AUX input.
Without the AUX input connected, when you press the MODE button and cycle through the options you will not see AUX as one of the available selections. Once a properly configured AUX cable is connected to the head unit then the AUX selection will be present.
http://www.bmwmotorsports.org/pdf/BM...stallation.pdf