Yes, that is part of it. The radio (all versions) accept volume, tuning, source, balance, fader, etc. commands over the I-Bus. The major difference is presentation. The in-dash radio assumes it is the center of the presentation universe along with the MID. So, it does not know to send the appropriate graphical presentation signals to the nav computer. So, an in-dash radio might work, but the radio nav screen would likely be dark.

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2000 E38 750iL Highline Edition, Upgraded with the lastest 2006 X5 Electronics
MKIV Navigation, 16:9 Display, Bluetooth, TV/Video with Backup Camera, Sirius, and Aux Input