Hmm, you are right, it should blend (mine does) if I select quieter (all the way) it mutes the radio and i only hear the nav instruction, otherwise it blends with whatever volume the source is set to.

Not sure what it may be now...

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Sept 03, M3, Silver Grey. Retro-fits: Modded Mk4 DVD Drive, OEM Bluetooth, VR Control, Rainbow Speaker Upgrade, Sony SOT Amp, HK Sub, CCFL, Intravee II, NightMode.