How underdrive pullies work is exactly as you describe. (in the e46's case) They spin the alternator, water pump and power steering slower. They don't 'make' extra horsepower they just let the engine use less of the power it produces to drive accesories and it instead goes towards the rear wheels.
On my mustang it was a noticeable difference. People seem to say its not on the e46 and that doesn't make much sense to me. That's why I would like real dyno and mpg observations.
I used to get about 27-28 mpg and lately I have been getting 24-26 but it is colder out as well. those # are at 70-75mph.
So any anecdotal evidence of mpg or power or hopefully a dyno?