Yes that mk4 should work in your 530d E39, you will need to wait a short amount of time for the functions and modules to apper in the menu page, it takes time for the system to recognise and adjust to the new nav computer.
Just go to v28, and it should be OK.
Remember to power down the mk3 correctly when upgrading to the mk4, or you will leave the mk3 in an unstable state, bad news if you are going to sell it on.
Look here for firmware updates.
http://www.xoutpost.com/articles/all-...ng-system.html
Hope this helps.