As usual, find one with a repair history and have a pre-purchase inspection.
The 3.0L engine is very reliable. Most likely problem is the thermostat which is afordable and reasonably easy to replace yourself.
The most common problems on the E53 X5 are the window regulators and electric door locks. Make sure the brakes are in good condition, the BMW OEM parts (rotors and pads) are expensive. The more electronic options the car has (nav, CD changer, power/heated seats, etc), the more likely to have a problem with one of those comonents. Be sure to get two remote keys that both work because buying a key is a dealer only item for over $100.
The 17" wheels and tires ride the smoothest but handling isn't their forte. The 18" wheels are a good comprise between handling and a smooth ride. The 19" handle VERY well and the ride is still very reasonable. The 20" have excellent handling but the ride can be somewhat harsh. 18" or 19" wheels are your best bets. The 18" wheel designs usually look pretty sedate and the 19" look very sporty and agressive - depends on taste.
Almost all X5's will have the premium package and its worth it. Full leather is really nice but the leatherette on some of the base models is almost indistinguishable from leather. If you need to save a few bucks, find one with the leatherette seats. The sun/moon roof option is a nice touch if you like that sort of thing.
Be careful about getting an X5 with the Sports Package. This provides stiffer springs, shocks, and lowers the ride height a little. Yes, your X5 will handle like a sports car with this package but it will ride very hard on the freeway and might be too harsh for long trips. Just be sure that you want this option before you buy it. Many people get this option after they feel how well it handles around town but never consider the ride stiffness on a 4-hr freeway drive.
Overall, the E53 X5 is very reliable but like any luxury vehicle, maint/repairs will be expensive compared to other SUV's. But what you get in return is a very luxurious and extremely well driving vehicle that is better than any other SUV hands down. If you want to drive an SUV, the X5 is the one to get.
Here is a pic of my 2002 X5 3.0L with 115,00 miles.
