hate to link this from another forum:
Q: What wheel/tire sizes can I go to on my E46?
A: Several people have successfully installed 18" wheels on their E46's, however it is unlikely that this improves performance over a 17" wheel. The advantages of a larger wheel are better steering response and aesthetics. The disadvantages are greater unsprung weight (may affect suspension response) and greater rotational momentum/inertia, i.e. acceleration and braking will suffer. Typically a +1 treatment yields good results (in cases of a car with sport suspension but 16" wheels, going to 18" may also work for you). I would recommend against putting 18" wheels on a non-sport E46 however as the suspension is not designed for that. The E46 can accommodate tire widths up to 235mm in the front and 255mm in the rear. Remember to keep your overall diameter the same! This means go from 225/50-16 to 225/45-17 not 225/50-17.
without increasing understeer i think you can go up to 225/45-17. if you dont mind it, larger wheels can be placed in the rear.