Perhaps this will help.

So we are agreed that the alert is for the transfer case. Yes, it is condition based monitoring, but not via a sensor in the oil. That is the engine oil condition sensor, and it measures capacitance, not resistance. It isn't picking up metal particles in the fluid, but rather the depletion of the additive package.

The transfer case fluid condition is not based just on mileage, like the oil change interval was based on fuel consumed. It is based on changing frictional characteristics of the gear oil, and the control box recognizing that those characteristics are crossing a threshold, measured by comparing slip characteristics (input and output speeds) and clutch engagement pressures (actuator torque).

I don't have a quote from the manuals on this iPad, but here is a quote from a BMW tech with an extract from the manual which covers it. Sorry I had to use a forum post but it does include the extract from the technical literature.

http://www.xoutpost.com/881911-post7.html

Edit: there are likely differences between the various x-drive transfer cases as to the above details. I know the procedure changed relating to resetting the TC adaptations at some point.

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2007 X3 3.0si, 6 MT, Premium, White

Retired:
2008 535i, 6 MT, M Sport, Premium, Space Grey
2003 X5 3.0 Steptronic, Premium, Titanium Silver
2002 325xi 5 MT, Steel Grey
2004 Z4 3.0 Premium, Sport, SMG, Maldives Blue