To be fair the E46 armrest is a bit craptastic. It's slightly too high and seems to squeek on most (not all) of the E46's I've driven as well. Irritating. Plus the leather on it costs horribly shiney after about 4 years so they all look rank.
The E90's design of having it built in as part of the console rather than a silly fold down afterthought is much better.