More information.
I did some more research on the x5world site and there are several threads which discuss the AV input issue. The most complete I found is at:
http://www.xoutpost.com/x5-e53-forum/...ighlight=input
It's frustrating that BMW don't appear to publish accurate information on the AV jacks in the console - even the dealers aren't exactly sure what it does and how it operates.
The bottom line however is that even if you're lucky enough to find the correct cable to connect an iPOD, the sound will only be Mono and the NAV screen can't be used for anything else (and constantly flickers).
Looks like DICE is the only way to go.