Cape X5 is correct...the prefacelift X5s uses/incorporates ABS/ASC+T/DSC in its AWD equation. The ADB (automatic differential braking) technology comes into play (thru DSC) when wheel slippage occurs. So if DSC or your traction control system is defective...it absolutely compromises the abilities of your AWD capabilities.
It's not that you have to push buttons etc...but you have a permanent 38/62 torque split (rear bias)...but BMW designed DSC-X to work in conjunction with the 1st X5's to give it AWD functionality in off-road & low traction situations. The early X5's system was built on the AWD systems used in the e30/e34 "ix" models...but added the modern ASC+T/DSC technology that those earlier models didn't have...thus the DSC-X nomenclature.
By 2004...BMW's variable torque xDrive debuts...thus the short-lived DSC-X is retired. I've posted details about DSC-X several times before...let me see if I can find it so I don't have to upload all of it again.
EDIT: found it...here's a direct link from about 1 year ago on how DSC-X (abs/asc+t/DSC) works in conjunction with your AWD system on the pre-facelift e53 x5:
http://www.xoutpost.com/1025825-post14.html