Forget speaker upgrade, go for an amp
Just finished the stereo upgrade in my '02 530i. I installed a new 4-channel amplifier then upgraded the front speakers.
The amp was upgraded about a month before the front speakers and was a great improvement over the stock unit. I am not sure what the specs are on the stock amp but it must be about 10w/channel or less given how much fuller (MUCH more bass) the sound is with a 100w/channel aftermarket amplifier. A 50w/channel amp probably would have worked just as well but the 100w/channel amp was what I had on the shelf. I mounted the amplifier underneath the package tray, in the trunk. In addition to the new amplifier I had to install a set of crossovers to replace the ones integral to the stock amplifier. I would recommend four 2-way crossovers. The front speakers are actually a 3-way design but the "mids" (mounted high on the door panel) and the "tweeters" mounted in the sharkfin can be wired together since both are 8-ohms and the resulting impedance will be 4-ohms. It might not be optimal but sounds fine.
The speaker upgrade was a lot of work and yeilded very little improvement over the OE setup. I would highly recommend skipping a speaker upgrade. If you should decide to proceed with an upgrade to a 2-way component set then I would recommend a woofer with a shallow mounting depth and a tweeter no larger than 3/4" --there's not much room for anything larger.
'03 SVT Cobra Mustang