After having completed the upgrade and tested the 2007.1 NA DVD, I feel pretty stupid re-reading my above post. Guess it happens when this is your first BMW and you are learning the ropes!

Initially, I put the OS v28 update CD in the CD player and not the DVD Nav system. The CD player tried reading it but after a minute it went quiet. Fortunately when I hit the eject button the CD came out.

I popped the trunk and based on davidr's picture above and directions (which were awesome..thanks again davidr!) I found the DVD-ROM NAV in the trunk. I removed the DVD and popped the OS update CD and the update went smoothly and completed in 2 mts and 50 seconds (yes I counted!).

After the update completed, the screen had a message asking me to remove the update CD and hit OK. You don't have to eject the CD, if the upgrade is successful the CD automatically ejects itself. I removed the CD and hit OK. The system rebooted in around 30 seconds and asked me to insert the CD/DVD into the NAV system. I popped the newly burnt 2007.1 North American version DVD and it read the maps automatically.

I noticed that the rendering is much smoother and the colors are more pleasant. I am going to see how this works out when I go on my 300 mile trip within the next couple of weeks.

Just wanted to post my experience so that someone else like me may find it useful. This forum is absolutely wonderful! Thanks all.