From memory (our E46 and a later model X3):

Have the key on, but with the engine not running. Use the selector on the end of the turn signal stalk to scroll through until the time is displayed on the dash. Ignore the radio time. There are two rectangular buttons in the speedo cluster, but they look like one button. One scrolls through the hours/minutes, and the other changes the digits. That's it.

Are you looking at the two buttons between the speedo and tach?

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2007 X3 3.0si, 6 MT, Premium, White

Retired:
2008 535i, 6 MT, M Sport, Premium, Space Grey
2003 X5 3.0 Steptronic, Premium, Titanium Silver
2002 325xi 5 MT, Steel Grey
2004 Z4 3.0 Premium, Sport, SMG, Maldives Blue