HELP!! Bad Voltage Regulator?

[we350z]

Hoping some folks here can give me some guidance.

Recently, I started noticing some strange behavior on my X5 with regards to the electrical system. The first strange thing that happened was that one time when I parked and turned the car off, my Umnitza Angel Eye's (wired to the ECU) did not turn off after a couple seconds like they normally do. Disarming and re-arming the security alarm did not fix this - I had to put the key back in the ignition, turn it to ACC and then remove it again, only then did it shut off like normal. Next when I tried to start the car again, when I turned the ignition first it clicked and did nothing - then i tried again and it sluggishly started (something I have noticed degrade over time). I also noticed my AE's flickering a little bit but then that went away.

While driving home I started paying close attention to the voltage readout on my ScanGuageII unit thats connected to the OBDII port. It was bouncing around erratically quite a bit, and dropping below 12V when I came to a stop. It sounded like the whole thing was straining so I turned off the heat, headlights, NAV/boardmonitor, turned down the dash lights, etc...

My immediate thought was that something was wrong with the alternator. I noticed several times that the headlights seem to dimming/fading in conjunction with the dash lights but they would only do this momentarily then come back. Things seem to be operating much better at highway speed. When I got back on the main road to my house there were several times I swear I saw the dash lights and headlights completely "blink" on/off for a split second.

While outside of the car with the engine still running I thought I could hear a strange whining sound but that might have been my imagination.

I was really worried because the next morning I had to drive back home from Tahoe to SF, about 220mi. I hooked up my battery charger to the battery to make sure that I would be leaving with a full charge. I disconnected my AE's and my sub woofer amp, and turned off all accessories to minimize the draw. I renewed my AAA membership because I thought there was a good chance I would run the battery completely down before I made it home.

During the drive home, even at highway speeds 55-85mph the voltage still wandered around a lot - typically from 12.4V - 13.5V and sometimes moved as much as 1V in either direction. Is this normal? I was told that when the engine/alternator is running the charging system should regulate the electrical system to be at a constant 14.4V? Upon stopping the voltage almost always nose dived below 12V than came back up to fluctuate between 12-13V.

So wondering:

1) My BOSCH battery is approximately 4 years old - 2 of which was spent in AZ with extreme heat. I have also run it down quite a few times working on the car, leaving the car sit for long periods of time, etc... Worth it to try replacing it? Maybe it is just struggling to hold a charge? My battery charger is really good tho (Schumacher SCUPSC12500A) and charges is to 100% on 2A/15A without entering de-sulfate mode or indicating the battery is bad.

2) I recently installed LED turn signals in the front when I installed my AE's. I have not yet spliced in the capacitors to normalize the ECU voltage check (to prevent OBD/cluster error messages) - could this be causing some problems?

3) My understanding is that alternators either work, or don't work. there is no in between. If it were dead my voltage readouts should never go above 12V I would think. So assuming this cannot be the case - that it can't be "going bad".

3) Is it possible that just the voltage regulator on my alternator is bad? Is there anyway to just replace this part without removing the alternator? How long can I go before it's completely shot? Guessing it will fry the battery before then. If you have to remove the alternator anyway I would just replace the alternator as well.

About a year ago I replaced my water pump successfully and it is still working great, so I am confident that I could replace the alternator as well. I would rather avoid the hassle and labor of doing this if possible. If I do end up having to replace the alternator and voltage regulator, since the alternator is water cooled - is it necessary to drain the entire cooling system or can you just remove it and top off the coolant after re-installation? Or will I have coolant gushing out all over the place if I do that? My only other concern is I don't really have any airtools and I hear the bolts securing the alternator are loc-tited...

Wondering if it makes sense to take the truck to the local indy shop and have them look at it and give me a quote. Not sure I want to go through all the hassle again - but saving $1400 in labor as I did with the water pump does sound attractive.