I just paired another iP5with my car, to check on this for Matt (see
http://f20.1addicts.com/forums/showthread.php?t=862053)
Both our iP5s connect by USB, and I can play Pandora and TuneIn radio via the cable. I can jog ahead a track at a time, using the iSrive controller. BUT, if I use the steering wheel control, it reverts to my iTunes music on iPhone.
As posted eaelier, i have Bus Nav and I haven't updated BT software since delivery in April. My s/w version is TX/MX-003.004.031