Ok I used the linky for the nav os provided by Angelynch above and the imgburn sw suggested by KiwiJochen as well. I like the interface for the imgburn better than the alcohol120.

I believe a properly created a nav os CD using the winrar to extract and imgburn to burn the CD (I used the 2X speed in this case).

I put my key in position 1, walked away for about 5 minutes (display monitor is OFF, as I had it turned off before I took the key out the last time I had the vehicle on), so in addition to the blank screen in general, I also have the display off. After waiting 5 minutes, I assumed the nav is booted up to whatever state a nav system can that has a wiped OS, and then I put the newly created BMW NAV OS CD into the MkIII ( I did NOT have a map CD in throughout any of these initial 5 minutes), and I walked away. I can hear the nav unit trying to read, but it sounds like it is in bursts of 3 or 4 attempts, then the unit goes quiet for a minute or so, then I hear 3 or 4 "reading bursts" again come from the nav unit, and this continues on for as long as I decide to just stand there and observe. Nothing ever comes up on the display (but again display is off) and hours later (started this over night) I eject the CD (never ejected on its own) and still nothing on the display and radio still cuts out around 2 minutes 40 seconds after ignition is turned back on next time. So I am not sure if the "reading bursts" are normal or if the CD is still not correct or if I am doing something slightly wrong in the procedure.

Also before I did anything, I ejected the nav unit from the housing and unpluged the antenna and the 2 connectors on the back of unit. I did this with the battery completely connected, not sure if ejected the unit or disconnecting it with power still applied matters, but I believe i read somewhere, where it was suggested to disconnect the nav unit for a couple of minutes (although I did it for an entire weedend as I was out of town), before you start the uploading of new OS process.

Any suggestions... my apologies for the long email, but I want to give all the details as maybe one of them matter. Thanks for all the help / suggestions so far.