BavAuto unit works, OK, sort of.
I just bought two of the units sold by BavAuto and they work, sort of.
They do not display track information on the display as advertised, and sometimes it seems to jump to different playlists. You have to set up six playlists on the iPod (BMW1, BMW2, etc) to mimic the six CDs in the changer.
There is a DIREECT mode that allows you to use the iPod to select songs, by using the iPod interface, which allows you access to the whole iPod. I routed the wire to the glove box and put the iPod there. Not practical when you are driving, of course.
The hybrid mode allows you to access 5 playlists and then disc 6 switches to direct mode, so you have the best of both worlds, such as it is.
I hate to go to aftermarket radios, myself. I had to recently in the X5, when I realized the cost of repairing the five unit Bordmonitor Nav system (Bordmonitor, radio receiver, CD-ROM computer, DVD player, and H-K amplifier) was nearly $2000 - for used parts from eBay (about 1/5 the value of the car).
I bought a Pioneer AVIC-Z2 with a 60GB hard drive, bluetooth, iPod interface, voice navigation, and DVD player, used on eBay for $480.
I sold the remaining components in the car (except the H-K amplifier) for $500.
So it was a free radio, basically. I am selling the CD changers from my other cars, but they fetch only $50 or so. I recorded all my CDs to my computers a couple years back and got rid of the CDs. Too bulky to carry around...
I am not a big fan of aftermarket stereos, particularly since most are so ugly. But the Pioneer double-din fit the X5 nicely and works better than stock.
The built-in 60 GB hard drive holds a lot of music, too.
Maybe they make a single-DIN that would fit the Z3?