First off, let me state that I am NOT an expert on tuning/building BMWs. But I do have experience with custom turbo/supercharger installations on other makes of vehicles.
I think your problem stems from the factory MAF (Mass Air Flow) meter. MAFs are calibrated to measure the amount of incoming air within a specific range. Most factory MAF sensors, for naturally aspirated vehicles, are not calibrated to read significant amounts of boost. Though MAF based systems are better at accommodating more added boost than MAP (manifold absolute pressure) systems.
Typically aftermarket turbo/supercharger kits for MAF/MAP equipped vehicles attack this issue in one of 3 ways:
1. Install a recalibrated (or completely new) MAF sensor. Update the ECU fuel and ignition maps, and install larger injectors. This is the most 'factory-like' approach, and in my opinion, the best choice for a street setup.
2. 'Trick' the MAF/MAP sensor readings, and use a piggy-back or stand-alone ECU to control additional injectors. These systems typically add fuel at a linear rate based on boost pressure. In MAP equipped cars, a system of check valves is used to stop the MAP sensor from reporting a boost condition. In MAF cars, a clamping circuit can be used to accomplish a similar effect. Not the best setup, but decent results can be achieved with skilled tuning.
3. Finally you can make use of a RRFPR (Rising Rate Fuel Pressure Regulator). This little gizmo replaces your stock FPR, and raises fuel pressure in proportion to boost. This is the most common method used for vendors of cheaper aftermarket turbo/supercharger kits. It is also the worst method to use, by far.
In short, I am sure the sensor is 'seeing' the boost, but is sending a voltage signal that is out of range for your ECU. I have trouble believing that you can throw 12lbs of boost at a stock N/A engine and not have a Check Engine Light, or have the ECU screaming codes (specifically in the P01XX range). Maybe BMW knows some mojo the others guys don't.
If all else fails, consult a BMW enthusiast's forum.
Good Luck
Bryan Carter