I am actually looking for a head unit for my E46 3 series BMW too. I made this complicated setup with an extra loom to give me auxiliary connection via a Connects2 box. I then connected a bluetooth receiver module to this. In theory, it sounds great. In practice, the connection is fine and getting power to the receiver etc is fine, but the sound quality is just atrocious.
So now, I've decided just to give up with the standard look. I think the best thing you can do is put in a double din head unit with a big screen and move the air con module down, but that's going to be £200-£300, which I simply can't afford. So I'm going to buy
this single DIN fitting kit, which includes the connections you need for the steering while, and probably
this stereo as it's the cheapest one I can find with all the features I'd like (iPhone connectivity, bluetooth, handsfree dialling). Shame it's in red, but I don't think I really have a choice.
Hopefully this will be much better quality than my current set up, and it's going to cost me £100 instead of the £60 I've already spent, and I'll return everything I've just bought.