Yes, you can use the iPod Shuffle.
Since I do not have iDrive or NAV, I set the Shuffle in the little cubby hole in the center console behind the shifter and the cord runs under the armrest into the port inside the armrest storage.
You just have to remember to turn off the Shuffle when you get out of the car. In 2.5 years I must have forgotten to turn it off about 20 times. Only to get in the car the next day to a Shuffle in need of a charge.