I just got a 2005 330 Cic - and was also dissapointed to learn from the dealer that Ipod wasn't very well supported - even though advertized on the ipodmybmw site.
Anyway, from reviews i've read it doesn't work that great anyway - you can only create 6 bmw playlists and it doesn't show the song title or any info other than track number on your display.
However, I did learn something interesting. The new CD player that it came with (Harmon Kardon) can read cd's with mp3 files. So basically you can load up a cd with a couple of hundred songs in mp3 format (or windows media I believe), and it works pretty well - although it still only display's track information.
So for now even though I have an Ipod - I'm not ipoding my bmw.
Hope this helps.