Check out the E46 tricks and tips #10:
10. The two knobs on the center control panel are to reset the short trip mileage and the other one is for changing the time on the clock and changing the time from army time (24 hour time) to normal time. And you could also switch the temperature display both on the dash and on the climate control between Fahrenheit and Celsius.
...use button on blinker arm to get to temp display and then use the knob on right to change from C to F.