Hey guys. I'm a cyclist who has the Westfalia hitch on my E46 wagon. Bike rack mounting is a no go, as there's no receiver like US spec hitches have for US spec bike racks to mount to, and the Westfalia bike racks are obscenely expensive even when they're not made out of European unobtanium because Euro regulations require them to have lighting systems and plate mounts and everything so that there's no obstruction of the car's lights.
I put my bikes on the roof rack.

I have M-Tech II kit on my car, there's a unique diffuser that has a removable flap for the tow bar for use with the hitch - 51127893074 (the flap is included with the diffuser, you don't have to order it separately as RealOEM would lead you to believe) - but you can just remove the diffuser as a whole if you don't trailer frequently.

If you look closely at the illustrations of the OEM hitch and the Westfalia one in the beginning of this thread you might notice that they look very similar, that's because they're the same hitch. Westfalia manufactured it for BMW.