Will upgrading the OS to v32 works on this unit?

No, because it is a Jap nav made by Alpine, and can only load Alpine software.

The BMW nav is made by Philips/VDO/Siemens, and can only take VDO-BMW software

Whoever owns this unit... I'll send you a copy of my Alpine map software DVD from the Alpine Nav NVE-N872A system I have... who knows, maybe they just re badged it from Japan... Worth trying to see if it works... although as Jochen said... The connections are different so I have no idea how you'll power it...

Alpine Electronics of America, Inc. - NVE-N872A

Over in Malaysia we have the luxury to see 3 different specs of e39. U.K, Japan and Locally assemble specs. However only certain units from U.K and Japan specs comes with standard BMW NAV while locally assemble specs doesn't. We don't even have an option to choose the options that we want for our BMW unlike in most countries.

Among the e39 owners that are luckly to have OEM NAV on their cars are mostly japan spec which are non functional outside japan. I think if we are to solved their issue is that they have to change their Japan DVD NAV to Mk4 + a complete new wiring. Am I right to say that?

You are right.

I have converted many E46, E38, E39, X3, X5 and Z4 navs from Japan Spec to Euro spec.

This work is what made me make my NavCoder program, which can be used to program the Euro nav fitted to the Jap car.

It is easy to change Jap to Euro nav nav, wiring only needs a little change.

Only new parts you need are the Euro Mk4 nav and 2 x connectors.
No new wiring loom required.

Where can I get the "2 x connectors"?

BMW spare parts department. They sell generic 18p connectors for the nav

I bought a lot from Kufatec in Germany.

Do you have the part number?

Sure:
RealOEM.com BMW E39 540i Plug terminal ELO not waterproof

You have to do some thinking yourself :-)