I will ad that my iPhone works flawlessly with the my 2006 330i's built-in Bluetooth integration. My car is a non-iDrive car, but all the address info, recent calls, etc. show up on the two line head unit. The iPhone has been very stable and sound quality is good. This is a far cry from that POS Treo 650 I was using. The Treo would not export any address book or contact info and would reboot about 10% of the time when taking a call. I'm a happy camper so far.
I have the dealer installed BMW iPod kit (the glove box one) and the iPhone works flawlessly with it as well. It works just like connecting any other iPod, songs come up on the head unit, the iPod charges. The only difference is the BMW logo does not appear on the iPod screen and you get the default warning about possibly wanting to engage Airplane mode on the iPhone screen. I don't plan on actually using the iPhone as a serious music player in the car as I've got a 60GB iPod more or less dedicated to music in the car, but it does work.
I also have a Belkin Auto Kit that I leave in the arm rest. This was my iPod connection kit before I got the BMW one installed. The iPhone works well with this adapter. The iPhone charges and music plays through the aux input. You get the same Airplane Mode warning as when you connect to the BMW kit which you can dismiss and everything works fine.
The airplane mode warning comes up whenever you connect an audio device which doesn't advertise itself as being iPhone compatible. This is to encourage the user to enter airplane mode on older speaker docks and prevent clicking in the speakers due to interference. This should not be a problem in a car else the presence of any cellphone in your car would cause clicking on the speakers.