For clarification,

It has a BMW Certified Warranty through 100,000 and has 70,000 on it now.

The new engine would only come if it failed as a result of the oil separator issue. They were clear in stating they would take no action until the engine failed.

I would end up stranded 250 miles from home either way.

I agree, if they will not do anything now and I am 99.9% sure its covered if it does fail in dreaded blue smoke, oil loss and or hydrolock way, that the warranty covers a new engine but serious PITA for all concerned if it happens.

David