Finally got the fan clutch off with multiple whacks from sledge hammer.
Okay...so the water pump was TOAST! Once I got the belt off, I could move the hub around like a ball joint...there was nothing left of the bearing.
I followed the instructions below, but I still can't believe I had to remove the freakin crank shaft pulley to get to the last bolt on the water pump. I also removed the throttle body to make it a little easier. This is a major, major, major job. I have never experienced a water pump replacement procedure like this before, and I've done quite a few of them on all kinds of different cars.
I found all kinds of stuff that looks like it needs to be replaced, but I'm not sure where to stop. I now have easy access to all the coolant lines, air lines, power steering pump lines, etc. The problem is, if I decide to make this my project car and order all the stuff I want to replace, I won't be able to buy my daily driver when I get paid again. Sigh.
E53 X5 4.4i Water Pump Repair DIY