That's exactly what happened when the splines on my front driveshaft gave out at 136,000 miles. Front driveshaft from BMW $900. Used transfer case with 76,000 miles on it $1680. Labor to "freshen up" the transfer case and perform installation $1620. Mine happened in August of 2009. Since then, you can get rebuilt transfer cases for $1000 with a warranty, and I believe there are sources for driveshafts that have a longer spline length for better engagement in the transfer case. Good luck!

2002 X5 3.0 236,0000 miles
2004 325i 105,000 miles