So after some research on what diffs I could use for the X5, the lowest ratio I could find would be from the 4.4L E53s only. They use 3.64 differential ratio. To me, this should be well enough. And going 70ish mph @3500 rpms would then drop to about 3100 rpms. I think this should be fine and hopefully pick up maybe a half mpg or two. In addition, maybe my 1st gear will be more useful.

Below you should see the pictures of this process.

Steps:
1. Remove both front CV axles left to right (this is REALLY easy to do with just removing the lower control arm at the K-member and removing the tie-rod ball joint--I don't know why ppl remove the whole knuckle just to replace a CV axle -_- )

2. Remove the drive shaft to the input gear of the front diff
a. Mark the bolts to the flex joint as there is a specific orientation for this to go apparently, should be 3, 16mm bolt-nuts and 3 flange-bolts
b. Once all fasteners are removed, pry the drive-shaft flange with a screwdriver towards the x-case, notice this pushes shaft deeper in splines which you can then remove flex joint and mounting flange

3. Drain your diff and get ready to loosen all 4 bolts to the oil pain, also remove vent tube
a. All 3 short bolts can be easily removed via 16mm socket, but the long bolt needs to stay in the diff housing until you can rotate it down to remove the bolt (NOTICE! These are blind holes on the side of the oil pan--that are aluminum!! Take SPECIFIC precaution when torquing and ONLY do by hand. DO NOT use power tools as you can hydro-lock your bolt and blow out your threads.)

4. Now rotate diff and move towards the rear, disconnect oil pan sensor if you think it will get in the way/break
a. Rotate diff input flange down to help aid in removing
* it might help loosening motor mount top-nuts so the engine can wiggle some more for added clearance

5. Installation is obviously the reverse. Do take note on when tightening the bolts to the oil pan! Make sure to clean threads on bolts. Don't use power tools for this! Tighten by hand! Only tighten to about 40 ft*lbs or so.


Couple of notes:
1. When reinstalling new diff, it might help taking the edge off various sharp edges, like the input machined surface, oil pan side surface--you'll notice on my last picture
2. I actually pounded with a hammer slightly the left side motor mount area just so re-installation of the new diff would be much easier--and it was, but what you see is the sharp edge on the diff digging into K-member. It might be better not to do this, but no welds were broke--so I'm okay with it.
3. Luckily, I still had good enough splines on the drive shaft to the diff as they look a little wore out. It was mostly rusty when I took it out which I wonder if it contributed to a lot of the wear. I made sure to grease up the splines real good upon re-installation. These are heat-treated splines so I'm not worried after 185k miles how these look.
4. Don't be afraid to mark things with your grease pen--this really helps with identifying what goes where.
5. You can easily identify the diffs with the tag on top, but the writing quickly fades away the more you wipe it

Attached Images

        

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2003 BMW X5 3.0i -- MT5, 3.64s final gears, H&R lowering springs, K-Mac bushing kit
2007 BMW X3 3.0Si -- MT6