Don't know which iPod you have, but my G3 hardly works with the BMW/Apple setup. Lots of background noise, not entirely "in sync" with the head unit, etc. At first, BMW thought it was the cord--$75 to replace. Instead, I got an iPod video, and it works better. Disclaimer--BMW says it only works with the iPod Mini and newer. Last time I took it in, they told me BMW had a "freeze" on iPod installs due to complications.

I've heard great things about the DICE system--I would look into that. I installed an aftermarket product in a 2004 Audi S4 and it works better than the BMW/Apple setup. It was $120 and took me 1 hour to install seamlessly through the glove box. Check out your options before throwing $275 at BMW, or whatever they charge now.