iOS 4 issues on a 2G iPod Touch. The car recognizes that an iPod is connected, but won't play anything. The only way I can get it to play is to press play BEFORE connecting it to the car, and then it picks up from the current location. But I can no longer use the car controls to rewind or FF, and the display (non-iDrive) doesn't show the song title.
Functionality is very restricted, obviously. I wonder if this has something to do with the general sluggishness the iPod has been experiencing since the update. Seems like memory is maxed out, and maybe it just can't support the BMW integration any more, for whatever reason.