So I'm wondering if this could be possible. I've read that a pioneer Bluetooth unit can hook up to the unit but won't work properly, so is this a hardware issue or a software issue, could I upgrade the software to the z3 software would it work right

No.

there is no way that you would be able to load any Z-series software on to ANY D-series units, mostly because in the 5-8 years difference between the two models, they have made major hardware changes (most notably, the addition of a hard drive)

with the D-series being one of the more basic systems out there, there is not much room to add many "add-ons" to it, at least the D3 has the option of adding the bluetooth module, if you really want some of the newer options then it is time for an upgrade.