I just had this same problem.
I have a 2005 X5 4.4i which just turned over 120k. Last week I had the 4x4 light come on followed by the Brake and ABS. I noticed that when I switched the vehicle off, I heard a distinct knocking sound coming from under the car for a few seconds, like the sound of a stripped gear.
So, I took the transfer case actuator off the vehicle, partially disassembled it to the point of pulling the worm gear out, and noticed that "the gear" was indeed stripped, just like discussed above. I also noticed that it was only stripped on about half of the teeth, all on one side. The other half of the gear looked like it had never been touched. I'm not certain, but it appears to me that the actuator only utilizes half of the gear or only 180 degrees.
I turned the stripped gear 180 degrees and reinstalled it on the transfer case. Only time will tell if this will last me another 120k, but it did fix the 4x4, Brake and ABS lights. No codes, no warnings and it didn't cost me a dime.
I'll let you all know if this holds up, but so far, so good.
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