Mine works ok (not 3g) however following the iPhone 2.1 update the contacts no longer transfer.
Got it working on Bluetooth without any probs tho. Just follow the BMW guide on how to set your cars Bluetooth connection into pairing mode. It's a cobination of holding down the button in the centre console in between the seats and then turning the key to position 1. If you have Nav, the screen will say pairing...
At that point go to Bluetooth settings on your iPhone, it should give you a list of bluetooth devices to choose from. Select the car, it'll be called something like "BMW123" then enter your pass key which you should have been given upon purchase of the car. Once you've entered it... You should be conntected. Likelyhood is the iPhone will connect up, you'll be able to answer calls using the car controlls, but if you're running 2.1 your contacts may not transfer. Let me know how you get on....