1. Inner Lights are the lights on the Tailgate (which i didn't replace). These house the reverse lights. I only replaced the "outer tail lights" the ones that house the brake lights and diirectional light. It has nothing to do with separating the actual lights just a way of talking about the four different lights on the back of your X5.
2. Facelift tail lights (2004+) are similar to Pre-facelift ('01-'03) SPORT Package Tail lights. They are both red and clear. The facelift ones however are more crystal looking with a silver turn signal area rather than a white. If you look closly you will also see that the facelift tail light lose the dots all over the tail lights, which you can still see on my inner lights and on your tail lights. They will make your X5 look newer guaranteed because of how the crystal shiny effect.
3. Mine are OEM from a 2005 X5. The kit you are referring to, since it is for pre-facelift X5's would give you the clear lights that are standard on a Model with sport package....so you would get red/clear tail lights but not the crystal Facelift ones as seen on my X5.

Honestly if you're going to get new tail lights get the facelift ones, they look 100 times better and can be had on ebay for about $100 for the set. Since you have a 2003 you will have to get an adapter from your dealer, but other than that its an easy install. General intructions are on the main page.