Sounds like they are giving you all of the incentive and then some. Doesn't seem like you can do much better than that.
I got my 525 for about a grand under invoice, and at the time I thought I was stealing it from them. Of course, I didn't know about the incentive. I learned about it on the morning that I was taking delivery. I felt that it was too late to renegotiate by then, especially since I had already lost one car that was sold out from under me and I put a bunch of dealerships (and myself) through hell to find another one with the exact color combo and options that I wanted.
I love my 5er. You will hear that the 525 is underpowered. That's true. I didn't care. My last two cars were sports cars, and I needed a sedan to accommodate my growing family. The 7 series was far too expensive and the 3 is too small for us. The 5er is just right and gives me enough power to get by. I mean how much power do I need to commute to work or drive the kid around? If I could have afforded the additional ~4K, I would have gotten a 530 and ended the debate. Nonetheless, I'm very happy, which says a lot b/c I even had to get it serviced after only one week (purge valve had to be replaced).
I think that the handling, braking, fit/finish are fantastic. I'm functionally illiterate as far as cars go, but even I can feel and appreciate the difference. To top it off, it's a gorgeous car with classic styling. Man, I've become a shill in just one month of ownership.
Bottom line, it's your decision. I would have preferred the 530, but that's just me. I don't know what your driving needs/wants are. Have you test driven it yet? That should answer all of your questions right there.
Good luck.