Hardware-wise, a RWD conversion can actually be quite easy if you leave the front diff. and opposing bracket on the sump (IMO, the ghetto way). I wouldn't do it that way; I'd do it the correct, albeit the more complicated and expensive, way. I'd remove the front diff. and opposing bracket and have some sealing covers machined for the sump. Come to think of it, if you leave the front diff. and opposing bracket on the sump, you're probably going to have to find a way to seal them anyways.
But those issues are pretty small in comparison to the electrical components. The electrical components are the really tricky bits.
First, get in touch with RPM Motorsport (
RPM MOTORSPORT LTD. BMW USED DME ECU Replacement Experts). RPM is a company located in BC Canada who specializes in BMW software - many of their engineers have actually designed OEM software for BMW in the past and continue to do so. They are incredibly competent. They actually removed the clutch position sensor, EWS, and post-cat o2 sensors from my race car.
Tell RPM what you'd like to do and ask whether they can tune out the transfer case actuation modules (i.e. leaving them constantly in RWD) so that they aren't driving the forward-facing spline and so the ASC/TC/HDC/etc. know what's going on (also ask whether they would need to do any other custom tuning). You're gunna pay a decent amount (probably WELL over $1,000 or even $2,000), but it's the only way to actually do the conversion and keep the car otherwise driving and operating as it should do.
All this software is obviously totally reversible if you ever want to go back to the AWD setup (e.g. you want to sell the car). Note: if you do this, you won't be able to do a Dinan tune without messing something up. And if you do a Dinan tune first, RPM may likely have to erase it because they go so deep into the coding that the Dinan tune wouldn't survive as the underlying architecture would be so vastly different than the stock architecture that the Dinan tune is built on.
As you can see, there are a bunch of "for every action there is a reaction" scenarios.
That said, I personally don't think it's worth the time or money unless you want to keep the car forever or unless you're willing to sell it as a RWD and take a MASSIVE bath on the sale price. To re-install everything for a sale and then to pay to have the software re-flashed to stock (you'd have to pay RPM to do the reversal) would be a royal and expensive PIA. Come to think of it, it might be so expensive that you'd have no reasonable option but to sell the car as a RWD car. And then they new owner would have to take all the old parts should he/she want them. One more thing, in that scenario, good luck finding someone who would even be willing to buy a car with such a drastic modification. I do a lot of custom stuff and even I wouldn't buy it from you unless you were a close friend and I knew the car intimately; imagine how the average Joe or Jane would feel...
I'd say leave it as it is and simply get a Dinan tune. Use the money you'd spend on RPM software and possible machine shop time to buy a new trans when yours goes (I'm not trying to be snide - I'm being realistic; I recently test drove a 2006 4.8is that had a new trans put in after only going 34k miles. One of my 3.0 auto X5s has 135k on the clock and the trans is starting to fail. Yours already has 84K. I'd say "owner beware." You just never know with these things).