I am in the middle of installing a whole new system in my car. From what I've learned, the BMW deck sends a differential signal to the amp (i.e., it is not using an RCA Cable). The amp is then separating everything out powering everything but the subs. The subs are powered by a separate amp.
If you plan on upgrading the speakers, you can't just drop in knew ones in the factory locations because the HK system is not setup for 4-ohm speakers (you could go try to find separates, but then you are stuck with the factory amp putting out about 15 RMS a channel). You will end up needing to get an amp. You can still use the factory head-unit, but since I wanted Pandora, Bluetooth, and other bells and whistles I went with an aftermarket head-unit (JVC and Kenwood have color-changing decks).
If you go the component route for front speakers, it is easiest to mount the tweeter in the factory location. For mounting the mid-bass the most common two options are mounting to the door panel or cut a hole in the door and mount to the door. Based on my research, if you are going to mount to the door panel buy something that is 6.25 to 5.25 because then all you need is an adapter and you can mount your speaker (assuming its bottom mount depth is less than 2.5"). I am going to go the door mounting route and use a 6.5" component set for the front. For more info on cutting the doors please see this thread on e46fantatics: http://forum.e46fanatics.com/showthread.php?t=317339