One problem I found was the timing of the pressing.

Open armrest, press button for 3 secs
turn ignition on (either posistion) Keep holding button
hold pressesd button for another 3 secs (not much longer) and let go. The screen then went to pairing.

One thing I was doing wrong was holding the buttton for a lot longer than 3 secs after turning the ignition on and it would not go to pairing. Now I count 3 to 4 flashes of the lights on the display.

Of course the system I have may be totally different to yours and I might be telling you rubbish as I am no expert but it works for me.

By the way mine is a late 2005 X5.

Good luck

John

when ever i push the talk button in the arm rest no message comes up and when ever i press the button on the steering wheel it wont do anything. but when i hold the button down on the steering wheel for 3 seconds it will display and say VOICE RECOGNIZATION. and when ever go over to telephone from my navi screen it will say activate phone and the lights on the top right corner of the navi will remain red it wont flash or anything.
i cant get the phone paired..