really mr.car salesman, really?
 

So, I get a call from a salesman at the stealer stating that he has just received the e70 that i have been looking for, the only thing is this 4.8 has the 18 inch wheels. I tell him that we can make a deal if they swap the rims for the 20 "snow flake" style.
he proceeds to tell me that the wheels wont fit because the x5's that the snowflakes come on have more flared out quarter pannels.
I told him that I really don't think that's the case.
is there any truth to his statement?

Nope. Maybe he is referring to flared arches. But even X5M does not have flared out fender panels, just flared arches. It ain't a M3 or 1M coupe. :)

1) The wheels will fit
2) The Snowflakes will stick out more on any X5 without 20" Sport Package because they will lack the extended fender flares

What he is saying is kind of true but kind of a lie. They will fit on any X5 no matter what package. BMW dealers tend to not install 20" on vehicles that don't come with the 20" Sport Package because they do not have the "appropriate" fender flares. In their world and on their computers "they don't fit". When dealers are going to upgrade a non-20" Sport Package vehicle it requires the extended fender flares. This, to the dealer, is a big deal and by the book.

The reality is that they will fit with no hiccups. Not a big deal at all. The front wheels will look stock. The rear wheels will nudge out just the slightest touch past the fender flare. Doesn't look bad. Some won't necessarily like that look. It looks beefy. Should it have the correct fender flares? Probably. But not necessary.

The 'correct' fender flares are also a) not terribly expensive and b) quite easily installed. If you do a search on this forum you'll find many people have done the swap themselves.

I am rarely one to defend a car salesman, car dealer, or service department. However, BMW cannot legally modify and sell you a vehicle that does not conform to state and federal motor vehicle regulations. If a wheel/tire package sticks out beyond the bodywork, they do not fit.

Of course, the wider wheel arches can be added, but the salesman probably knows that list price for the parts, plus labor at their shop rate, would be a deal-breaker.

I assume the speedometer will also need to be re-calibrated.

Nope. Outside diameter of tire is the same. 20" wheel is just lower profile tire.