PSA: Check Your Trunk Wire Harness
I knew this day would come.
Earlier this week, the trunk refused to open when I hit the interior trunk release or the button on the key. I could only open it manually by turning the key in the keyhole. The trunk interior lights didn't come on when I opened the trunk, and the trunk-open light in the instrument cluster was continually lit. It occasionally flickered over hard bumps.
I'd done this repair once already - several years ago, on my 1997 328i. (See signature for details.) When the trunk lid wires on that car frayed and started to cause short-circuits, the central locking system fuse kept blowing. My E46 didn't do anything that exciting, thankfully.
After some exploration today, I found that the ground wire for the trunk lock actuator was completely severed after years of bending and kinking. See the attached photo. All of the other wires in the bundle (16 total) are still intact, but they're bound to start fraying too. Since there doesn't seem to be an affordably priced E46 replacement harness available at BMW dealers, I'm going to splice all new wires into the part of the harness that passes from the body to the trunk lid. I already have a new rubber cover and splice connectors; I just need to purchase the wire. The wires in the trunk lid are all 18-gauge and smaller, and the wire I have on hand is just too big for 16 of them to pass through the rubber cover. For now, I've spliced a short length of new wire to replace the broken wire, and the trunk lock and trunk lights are working.
I will update this thread with observations and tips after I complete my repair. If you're having trouble with your license plate lights, reverse lights, or the trunk lock actuator, you might want to check for frayed wires.