The only way you can get an in-dash system for newer BMW models is to get an adaptor facia plate that fits in the position of the existing radio.

With the 1 series not even out yet in the US, I don't know if you can order an adaptor facia plate in the US yet. But in the UK, it's already available.
http://www.justkenwood.co.uk/install/show_model.asp?id=331

Usually, places like crutchfield.com will supply the facia plate as well as a harness to fit the car you selected.

You can choose a standard DIN sized flip-up LCD units with lots of features.

Check out the KVT-617DVD... looks like a bargain compared to the BMW factory system. You can also add a rear camera to this unit.

Features:
KVT-617DVD DVD player
in-dash DVD player with built-in amplifier (22 watts RMS/50 peak x 4 channels)
motorized, retractable 7" LCD video screen with touchscreen controls and six selectable backgrounds
direct touchscreen selection of DVD menu items
plays DVDs, DVD-Rs/RWs, CDs, CD-Rs/RWs, Video CDs, JPEG images, and MP3/WMA discs
System Q Sound Control
System E's+ Advanced Crossover system
Installer Memory retains audio settings even if the vehicle's battery is disconnected
XM and SIRIUS Satellite Radio-ready (you can add satellite radio for under $100, plus subscription)
compatible with Kenwood CD changer, TV tuner, HD Radio tuner, or iPod Control Interface
rear-view camera input
input for a compatible Kenwood navigation system
two audio/video inputs
audio/video output
dual-zone capable
front, rear, and subwoofer preamp outputs
wireless remote control
DVD frequency response: 20-22,000 Hz
DVD signal-to-noise ratio: 98 dB
FM sensitivity: 9.3 dBf
designed for use with "Region 1" coded DVDs
KNA-G510 navigation system
navigation system offers turn-by-turn map and voice guidance
GPS satellite antenna
built-in road maps of the United States and Canada
over 5 million points of interest
maps displayed on your DVD player's video screen
voice prompts offer turn-by-turn guidance
compatible with Clear Channel Traffic Message Channel and XM Satellite Radio traffic information services (subscriptions and extra components required, available soon)
multi-destination route planning
automatic rerouting for missed turns
route customization options
2-D and 3-D map views
trip computer
SD card slot for map updates
12-channel WAAS-enabled GPS receiver
4-1/2"W x 4"H x 1-1/2"D
package warranty: 1 year