I can't comment on the diesel because it wasn't offered in the US for the e53 X5.

Regarding fuel economy if you're thinking of going with a gas powered version I would recommend the bigger engine as the smaller engine doesn't get appreciably better gas mileage in comparison.

As for reliability I'm undecided about that one. I've owned two X5's but none for any really long period of time. And the one's I did buy were higher mileage.

With that said the first X5, a 2000 4.4i with 80K miles, required a new MAF sensor, new control arm bushings, and a valve body assembly for the transmission.

My current X5, a 2001 4.4i with 108K miles, has required two windshield washer pumps, new CV boots (actually I replaced the axles because it was $30 more per side to do the entire axle), new control arm bushings (these were not absolutely necessary but I did them because I saved some labor cost by combining the work with the CV boot replacement), two oil separator hoses, and the self leveling headlight sensor.

Those are the things that were required to address operational issues with the vehicles. I've also done some preventative stuff such as replacing the various fluids (oil, brake, transmission, transfer case, etc).

As for the transmission failures the jury is still out on that one as far as I'm concerned. I've read of various problems with them and, having experienced a problem myself, feel there might be something to it. But then I don't have a large sampling size to draw any concrete conclusion. Reading a help forum is bound to give the impression there's a problem. I suspect a lot of problems are due to the "lifetime" fluid BMW specified for the transmission. I don't believe in lifetime fluids and that's why I changed mine.