I'm not familiar with the factory audio/iPOD capabilities in current cars as I have a 2006. However, here's a few things to consider that should answer your questions and also give you some other options to consider...
- The iPhone snap-in adapter really only fits a first-gen iphone correctly. It's not suitable for a 3G iPhone for two reasons... physically it doesn't fit well and more importantly, they changed the charging scheme on 3G phones from firewire to USB obsoleteing a lot of chargers including the snap-in adapter.
- The iPhone snap-in adapter doesn't provide a direct connection to the external antenna. There are rumors it may provide an inductive connection but I don't think that's been confirmed. It's best to assume your reception won't be improved.
- The iPhone snap-in adapter does not provide or allow an audio connection in anyway.
- As you may have read, the hidden nature of the iPhone snap-in adapter makes it easy to forget your phone and it's also not very convenient IMHO.
In light of all this, I went with a spec.dock from
www.2point5.com which sits in the ashtray (which is a complete waste of good console real-estate) and allows your iPhone to be charged, access music, and makes it super convienient to dock/undock.
You can either buy just the dock/cable from them, or the dock/cable/interface. The offer both the BMW ipod interface and the Dension unit. Again, I'm not familiar with what your factory installed situation is as my car is a 2006 and came with only an analog AUX in and no ipod integration.