Hate to be the one to say this, but this is a situation of action long over due. OP - you seem to be handling this dealer with white gloves - don't know if there is something I am missing here.

The dealer committed a grave mistake and for them to have you on the hook for this and for this long is absurd to me. You shouldn't even be discussing giving them additional work considering what they did. You should have been raising hell a long time ago. Maybe it is not in your personality to do so, but you should have sought legal action against them sooner in this ordeal or stand firmer and demand results.

From I understand, the engine in question is actually built by Alpina for BMW - so this might explain why it was difficult to obtain and had to come from Germany. With that said, an engine for any X5 should be US spec as the cars are built here and it would be silly to make a bunch of different engines. Even if they did, I would assume it would be a case of simply switching over Emissions equipment - which these days is stricter in Europe than the US.

Please stop allowing them to drag this on. They have taken advantage of your patience way too much. It's time for them to fully face the cost of their mistake.