Update on the USB/iPod cable for the iPhone 3Gs.
In the OP I said that ... "Our 35d with the $400 USB/iPod option, came with the Y adapter cable part# 61-12-0-440-796 that does NOT charge our iPhone. But bigX5er has posted that the Y cable part number
61-12-0-440-812 DOES charge an iPhone 3Gs

"
Today my wife dropped by our BMW Dealer and our absolutely wonderful CA swapped out or 61-12-0-440-796 cable for one with part number 61-12-0-440-812. And a minor miracle happened

61-12-0-440-812 DOES charge my wife's iPhone 3Gs, even though the iPhone still complains that the "accessory" is not designed to work with the iPhone 3Gs and offers to put the iPhone in Airplane mode. Pressing No lets everything work OK.
But there's more to this story...
Interestingly, if you search for 61-12-0-440-796 on
getBMWparts.com you will be redirected to 61-12-0-440-812 and told that 61-12-0-440-796 has been superseded by 61-12-0-440-812. And if you search realOEM.com for 61-12-0-440-796, you will get nothing. But if you search for
61-12-0-440-812 you'll find that this is the Apple iPod cable used in a whole slew of BMWs.
None the less, when our tireless CA checked a bunch of BMWs that the dealer had recently received from the factory, every one of them had the OLD cable (61-12-0-440-796)

The only 61-12-0-440-812 cable he could find was in the parts department. SO...
Anyone taking delivery of a new X5 with the USB/iPod option should double check the part number on the cable BEFORE you sign any papers. Your CA might not be as good/willing as our was, to work things out 7 months later when you finally get a new iPhone 3Gs.
Funf Dreisig
Edit: One other thing.... While testing the iPod vs Apps sound out functionality, I discovered that the sound from apps (e.g. IheartRadio, NPR, etc) IS played via the BMW sound system very briefly when a new app first starts playing sound. But the BMW sound system quickly switches back to the iPod sound.