I find it interesting that on both boards that I posted this situation that other people have not had this problem. Mike Miller had this to say:

I have never before heard of a BMW that rusted out as badly or as quickly as this 2004 X5.

He also was aware of the fuel lines rusting out several months ago. The climate may be part of the problem but the dealer has not had any other of their customers with this at low mileage. Since this is my wifes' car she washes it every week over and under unlike my 3 series which gets washed when it rains.

The dealer has sent the warranty history on this vehicle to the area manager to see if they will help.

Fred