All you need is a 3.5 mm jack to a 3.5mm jack - available from Maplin or most electrical/i-pod retailers. This will only play the i-pod through the stereo - you can't control it using any of the steering wheel or stereo buttons.
You need a Dension i-pod link for about �100 to get text and sound and using your CD changer buttons - scroll through the menus and playlists. They come with a drill free mounting and are the safest way of listening to your i-pod in your BMW - I've bought three now for different BMW's and fitted them all myself with no problems whatsoever.