I noticed that playing mp3 via USB is considerably worse than FM radio or CD player. The sound seems to be "dirty". I think it has nothing to do with MP3 conversion loss since I've tried to use higher bitrates too... I'm not an audiophile kind of person, so it's strange I can feel the difference so easily.

I've visited B&M website and it offered me an update to 5.5 and 5.6, so the one I probably got is 5.4. My conf file is:
<CarType>Bravo</CarType>
<Configuration>6BF80</Configuration>

Can I expect that after the update, sound quality gets better? 5.5 and 5.6 installation guides say that the updates are not recommended unless I experience issues with Apple products, which in fact is not my problem. Also, I've read a lot about breaking B&M after update, so I'd like to avoid unnecessary risk...

thanks

Problem is partially solved.

It turns out that the root cause is most likely my Instant Nav, which is "on top" of Blue & Me. Native B&M's Media Player is either playing too loud or there is some equalizer applied to AUX port (which is probably used to connect B&M with Instant Nav stereo). I've also noticed that on other forum sb was complaining about USB/mp3 quality and he/she even decided to buy another device to replace Instant Nav.

What helped me was to decrease loudness of my mp3 files. There is a lot of software which may help you to do that. I was using MP3Gain, which is freeware and very easy to use. I've aligned all my mp3s to default volume (89 dB) and the sound quality significantly improved.

I find that when playing MP3 files from a USB stick, the exact same MP3 will come out a lot louder through that than playing it from a CD. I mean I've burnt the actual MP3 file to the CD and not made an audio CD.

I think it's something to do with the USB playback being done by the Blue and Me system which forwards the audio to the radio and it's doing so at quite a high volume. Also explains why the USB in my car doesn't work without the ignition but the radio and 3.5mm Aux socket does.