Time for another update. As the weather warmed up, the hesitation became constant during any acceleration. After lots of back and forth, the dealer agreed something was odd with the ilevel, but did not think it was the issue. They still thought it was the transfer case. I pressed them to just update the ilevel first as that is $300 compared to $6000 for a new TC. So last week it was flashed to 2015 ilevel and the hesitation is now completely gone.

Yesterday I drove 400 miles in 95 degree heat and it did not hesitate once. Evey once in a while it is a little more jerky than I would expect when accelerating from a stop. This may indeed be the transfer case or just diesel turbo lag. Acceleration on the highway is now perfect.

Next, I will change the TC fluid to see if that changes the off the line smoothness. I also, can unplug the TC under the car and see if that changes anything. I am not against rebuilding the TC myself. Parts are available for around $300 and a rebuild is probably easier than changing the vacuum hoses on a diesel .

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2009 35d, 2006 325i & 330i