The purpose of the Auxillary water pump is to keep the coolant flowing through the heater matrix when the car is idling, eg when in traffic. This is so the cabin can be heated while the car is idling, the normal water pump is mechanical engine speed dependent so doesn't flow as well when idling.


Pictures in this thread will show you where it is in the M54 engine:

http://www.bimmerforums.com/forum/showthread.php?1881604-Cooling-System-Overhaul-M54-530i

M54 is same as you 2.5L