I have the 2nd Gen iPod touch and it does not charge it. The manual said it does charge some of the early ones though I don't remember off hand. I found it not to be a big deal as I take it out of the car often and just charge it at night via a plug.

The connector on the BMW iPod adapter is the flat dock connector, not the headphone jack. Below is a link for the part #'s on BMW's site.

BMW Accessories - 2007 X5 3.0i SAV:iPod® Interface Adapter