hi, i drive a 2002 X5 4.4i sport auto permanent 4wd , the 2004 onwards have xdrive , this means they usually only drive the rear wheels so that you feel as though driving a rear wheel drive . the transfer case has a clutch pack to engage also the front wheel drive or send power in variable ratios to front or rear .
my wife drives a 2004 X3 3.0i auto SE with factory tow bar and uprated rear suspension .
i do not recommend the sport suspension for transporting small children ,nor the uprated suspension .
either car in SE form may be acceptable , especially the X5 as it is more spacious , has flat floor access in the rear seating and a split tailgate for easier access although the X5 boot floor is considerably higher and may or not be suitable for loading a baby buggy.
only issue with the seating area flat floor is things could roll out when you open a door .
the X5 is around 20cm (8 inches ) wider than the X3 overall .