I have the upgraded HK in my e46 M3 but was not satisfied with the quality and wanted HD radio. So I started with the head unit and purchased an Alpine iDA-X001 with HD and enhanced iPod connector (it basically corrects the mp3 with the MediaXpander that "restores the harmonic structure across the full bandwidth" of compressed music; in few words make mp3 sounds much better, close to CDs).
After that I thought I would go the extra mile and get an amp+new speakers+new fatter cables but the sound greatly improved just by changing the head unit (only $700 for HD and ipod connectors). I didn't think it was worth spending extra $$.
Anyway it doesn't matter how much you spend on the car audio, there will always be the background noise of the tires wind and melody of the engine that will distort the music...