First off, welcome to the forum.
This looks like the kit you have installed,
http://www.realoem.com/bmw/showparts...18&hg=65&fg=95
This was an "add on" non standard BMW option (supplied and fitted by the dealer, but not made by them), the disc that came with it states "Accessory navigation system" where as the new (2007-2) is for the "on-board navigation system", this is where the problem is I think.
You need to go back to the dealer and say; "I have an 318i E36, the Sat Nav in my car is a bmw supplied and fitted
accessory navigation system NOT the onboard Sat Nav system, can you please supply me with the correct "
accessory map disc" for my seimons Sat Nav drive (Part #: 84 11 1 470 181 or 84 11 1 470 121).
They (BMW) should be able to get hold of one for you.
As for a firmware update...not sure if its possible on that unit?
HTH