Normal functionality, as in BMW needs to release a software update to fix this bad UI.
One thing is to disable BT Audio in the phone when USB is connected, another is to de-select a phone setting in the iDrive after the fact.
-2012 E92 M3 Jerez Black/Rust Brown, M-DCT: September ED
-2008 E90 M3 Melbourne Red/Bamboo, 6MT: Gone
-2007 MK5 GTI United Grey/Grey, DSG: Gone
-2004 E46 M3 Carbon Black/Cinnamon, 6MT: Gone
-2002 E46 330i Orient Blue/Natural Brown, 5MT: Gone