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Don't know about max size but I will say that my 250GB mini external drive (non-flash) was not recognized. I use a 32GB flash drive. I have to say that if you aren't good at organizing your music by folders then the interface is poor. It lets you browse the folder structure which is great for me but if you want to use the tag search it doesn't display albums correctly. some albums of mine sort alphabetically instead of by track # when using the search album function. I live and die by folder structure anyway as I store my mp3s on a file server so it's a non-issue for me.
You have to take in to account the file transfer time as well. I get about 10GB/hour at best but the great thing is that if your transfer doesn't complete all you have to do is reinitiate it the next time you drive and the bimmer will pick up where it left off.
With the ipod interface I also found the search function to be cumbersome and not user friendly especially while driving. Best is to live and die by playlists. I found an itunes script which auto creates playlists by tag. So for example I just set it to create a playlist for every album in my library.
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