Retrofit that option maybe is around 2,000 USD ... I also thought it was just a software restriction...but it's hardware related. I bought the Y cable from this seller http://www.ebay.co.uk/itm/BMW-iPod-i...item2c6286220e
it worked perfect with my iPhone 4 (be careful where you buy this cable because it has a chip inside, if don't, it doesn't work). If you want to buy from a dealer, it maybe cost 90 USD.
I am waiting for my adapter next week.