No, my X3 will shift in manual mode. I've done it before. Sometimes after driving for a while at a constant speed one forgets they are in manual mode - especially when the car downshifts itself to M2.

Needless to say the music was loud, and I was wondering something felt different. A look at the tach and I was at redline, and then it shifted.

Now the question here, is whether or not DSC being off removes this auto shifting capability. It seems, as per one board member's experience, it does... I'll have to go try...