Ok so I figured out what I had been doing wrong. As far as I can tell there are two options for pairing with a bluetooth device from the BMW:
"search for paired devices" -- to switch between already paired devices (only one can be connected at a time)
"search for a device to pair" -- to add a new device -- select "BT" on the radio display (non-iDrive) and select "Search"

On the BlackBerry there are also two discovery modes in the Set Up Bluetooth dialog:
Active Search -- to find a device for pairing
Passive Listen -- to wait for another device to find the BlackBerry

So the magical combination for me was:
BMW: search for a device to pair (MENU..PHONE..BT..SEARCH)
BlackBerry: Active Search (Set Up Bluetooth..Add Device..Search)

On my BlackBerry I was prompted to enter a passcode, so I made one up and entered '0000'. Then on the BMW I was prompted to accept the incoming connection, and then enter the passcode again, so I again entered '0000'.

All good.

Hopefully somebody else will find this to be useful.