To add a subwoofer to e46 is not a problem, basically u need an amp to power it. Assuming your fren is not changing the front components and HU (altho he should), what will happen is the sound quality doesnt change much, except that it now plays the sub bass frequencies. I would not suggst active sub cos it lacks flexibility in terms of adjusting the gain and the low pass crossover.
What he needs is a Hi-lo converter cos the stock HU has no rca output.
The HU can be changed, steering remote can be retained with an adaptor which cost i think about $250 plus minus, which in my opinion is not worth it. Blaupunkt HU are not recommended from wat i've heard from enthusiasts.
For Ipod, i think the easier way is to simply purchase a iTrip which is wireless and the HU will simply play the songs from your iPob library.
Snail_Mobile,
simply remove the rear speakers, no need to cut anything...
my two cents..