Dous it sound like metal splines stripping out? If so I would suspect the front output shaft splines of the transfer case. I see that sometimes on the <04 X5s that don't have x-drive.

Otherwise it would need to be properly diagnosed... and I'd ask the service manager at that dealer if they have an older tech that is more experienced with suspension work as it sounds like you likely had a less experienced entry level tech that wasn't sure how to properly diagnose the hard to find noises.

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X5 pics

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2003 4.6is