The "don't know" wire in the second image from the top is most likely the dash light dimmer. Some stereos have an option of connecting to it, so the intensity of their illumination can be varied.
The head unit shown in the picture clashes horribly with the dignified austerity of the classic E30 cockpit. Does anyone know of any modern aftermarket units that do not cater to the bling-bling crowd? Specifically, something with a SD card connector and a USB port? I went both to a local audio store and to crutchfield.com - those horrible blue lights... They're everywhere...