The sensor itself is right behind the grill opening and there is nothing in front of or around it that could produce the heat in this manner. But I'll try the canned air test to see if it responds.
Regarding the reading, I know on the E38/E39/E46, when the sensor becomes physically damaged (i.e. tip broken off or torn from wireing) it reads -40* and this one is fully intact from what I can see. I've been scouring the internet and found a few references to the 122* issue and some have been just the sensor while others have been wiring or another issue entirely.
Guess I'm taking the bumper panel off this weekend to replace the sensor and go from there. Hey Ard, you want to come down the hill to the West Valley and pull a bumper panel with me?