i have a 3gs with an updated IOS5 and pandora via bluetooth still works.

Sorry, but how does one stream Pandora from the iP4S? You are talking strictly about BT without the "connected" cable, right?

I found these instructions but BT still does not do Pandora:

1) Press the CD button near the iDrive knob.
2) Scroll all the way down on the source list to "Bluetooth (audio)"
3) Your iPhone should be on the list if it is connect via Bluetooth
4) Press the Option button under the iDrive knob.
5) I don't remember the exact lingo, but it should be something along the lines of "Configure <iPhone Name>"
6) Make sure the Audio box is checked
7) Your iPhone should then appear as a Bluetooth source under External Devices

I can't get ANYTHING to work on my nokia 6340i....

The updated pandora with the IOS5 issue is now available on Itunes. I just downloaded it, I will report back when i try it.

The new update should fix the issue on most vehicles according to the information I've received.

The fix worked perfectly!

Pandora v 3.1.15 with iOS 5 works perfectly now.

Are you all referring to BMW Apps Pandora (with artist information on nav screen) or just plain Bluetooth streaming?

BMW Apps Pandora.