Originally Posted by PropellerHead

You might imagine that the issue has been discussed a bunch on this site. Even dealers were clueless about it as recently as 2008. It was reported here complete with dealer tech comments. The dealer from whom I bought my '04 E53 last year also did not know about this oddity to the '04 build years. The monster thread about 2004 BT is also right here on this site.

User after user with 2004 E53's have seen this exact problem and written to the forums.

You'll need a new BT unit through E53 2004 production according to the SIB (attached above). I installed a replacement in my 07/04 production this year.I wanted the pairing button under the center armrest, so this is what I bought:

Item: OEM BMW Hands-Free System with Bluetooth Technology
Price: $485.00
Tax: $0.00
Qty: 1
Total: $485.00

Item: CABLE PIN ADAPTOR
Price: $14.00
Tax: $0.00
Qty: 1
Total: $14.00

Item: INSTALLATION KIT
Price: $131.20
Tax: $0.00
Qty: 1
Total: $131.20