News from BMW
"Tom,
1. You are correct, it is not available in the 40i but in general its a BETTER SOUNDING system (M Sport Exhaust). It doesn't necessarily improve performance.
2. The M Sport Exhaust is completely aesthetic and has NO mechanical control for the driver. That being said, the system does improve the growl in the SPORT and SPORT+ modes.
3. All BMWs have some level of sound piped into the cabin through the speakers. It's purely a design feature, however, its so subtle and acute on the X5 that you may not even notice it. "