Stock e39 wheels stick out past the fenders and quarters on a e46.
that why a smaller tire works, as it tucks under the fender?
I have style 5's on my E46 with 205/40/17, had 205/45/17 and for my winters I am currently running 205/50/16 on some E39 offset Mille Miglia's with no problems at all. The absolute widest that you can go is 215 on a E39 wheel to get it to fit. If you are lowered, then you will need to play with it and see what you are comfortable with.The offset is different and I've seen smaller tires on e39 wheels mounted on e46s and they still stick out. I've seen bent quarters from it.