Given the info. you have provided, I can think of only two scenarios - either the output shaft splines on the t'case are totally munted and the output shaft needs to be replaced or the fault is actually in the t'case itself - worn drive chain most likely. 
You'll need to source non-BMW parts to repair the t'case (if that's the fix) as BMW only sell complete t'case assemblies. I don't much for the ATC500 t'case except for chains either....
I guess it's also possible the front diff has shat itself but that's pretty rare - about as rare as a facelift E53 chewing out the front drive shaft splines.
Did the indy pull any codes by any chance?