I don't have the enhanced BMW USB option or sat nav, and only basic usb/bluetooth in the car. Therefore i ordered this cable to avoid paying the dealer about £43. Plugged my new ipod (160GB classic) into it via the usb AND aux connections at the same time and it works perfectly. I can see the screen give me options to play by things like album, artist, genre, playlist, individual track, etc.
However, i also tried to play music copied onto a 32GB usb stick and plugged directly into just the usb port, and that works too EXACTLY in the same way as the ipod.
The BMW software sorts out the music info by itself in each case.
So why bother with the ipod in the car then? Well, the only reason i can think of so far is that when i connect my ipod to my PC it will sync the songs played and update the playlists. I haven't yet figured out how to do the same using the USB stick.
Sound quality? Well i seem to think that the USB stick seems to sound better, but i've only tried out my new Y cable briefly for the first time today. USB sticks these days are very cheap to replace compared to an ipod so i might stick with the USB stick instead (despite having bought the cable - i had order it before i realised that the USB stick would work). I can't see what advantage the Y cable gives me at the moment.
What i would like either the USB stick approach or the Y cable ipod approach is to play all songs in order in an album, but for the albums themselves to be chosen to be played in random order, but i think this is a BMW software issue, as i don't think it can be done. At the moment i can only seem to play either all tracks sequentially or randomly within an album, or all tracks sequentially or randomly from all albums, but not all tracks sequentially in shuffled albums. This is even after if i have selected albums to shuffle on my ipod.
Incidentally my old ipod 3g does NOT work with the Y cable. I believe this is because versions 1-2 charge via firewire, whereas the later versions charge via USB. Hence as the car only has USB, then it has to be ipod version 4 upwards.
Note my comments only relate to the basic BMW audio with no fancy enhanced USB or sat nav - so i don't get album art. Also, just plugging in the apple USB cable doesn't work with my ipod as nothing happens.
Summary: cable works! (for the set up described above - but the the ipod has no advantage over the USB stick in terms of functionality, except maybe for later syncing with a PC. If anything, the USB stick approach is cheaper, and i think, has a better sound quality).