Help - Yellow Oil Sludge, Oil Light, White Smoke, etc.

[DanOx]

Hoping you guys can help me diagnose an issue. Bear with me as I tell the full vehicle story here…

I purchased a clean lower mileage 2003 E53 3.0i X5 (87k at purchase) for my wife this past summer (August 2012). When I was test driving the "check oil pressure" light went off a few times. Determined that whenever the car was in Drive and I torqued the engine (above 3500 RPM or so) the pressure light would tick on (did not happen in Neutral at these RPM). Now it was a near 100degree day here in MN and I was driving around the hot city in the blazing sun. When I pulled over to check the oil levels everything was normal. However, when I opened the oil filler cap some steam arose and I noted some yellow sludge around the cap opening (and a little bit on the tip of the dipstick).

Figured this could be a few things…

YELLOW SLUDGE…
1) The woman who drove the X5 had regular service history and records from a reputable indy BMW shop in town. So no major worries…
2) She worked in the city, and only drove the car a few miles to work each day (under 5miles for sure). So I figured the sludge was from the engine not warming up all the way on these short trips (especially in the brutal MN winters).

OIL STEAM…
1) It was a blazing hot day with very high humidity.
2) The car had obviously just been detailed. This included a full engine degrease and most likely an engine wash or steam cleaning… I figured the oil sensor could have had some moisture in it due to the cleaning & then high humidity (near 100%) on that super hot day.
3) The car hadn't been driven in a little while… The woman was selling as the kids were now out of the house, her husband had a truck, and she had just upgraded to a brand new 5-series X-drive sedan. The car had been sitting for a few weeks since she had purchased the new vehicle. (ex, brakes were very squeaky – but had plenty of pad left & no sign of rotar warping. Drove for about a week after purchasing and the squeaking went away – now it's January 2013 –
4+ months later and brakes are still strong.)

Could have been a sensor, oil pump, or any number of other things… so I got him down on price a bit more & ended up purchasing the vehicle.

Well, by the time I got the vehicle home the "check oil pressure" light had not flashed again (no more dash lights). I changed the oil later that week (full synthetic Mobile 1 as the previous owners receipts indicated they had done) and cleaned up the sludge/gunk as best I could… the car has been great since then with no oil light issues.

Well, this week – beginning of January 2013 – a "check oil level" light came on. I am about due for an oil change anyway – 4+ months & just hit 90k (3k miles since the last change). I checked the oil level – it was a little bit low, topped her off to get my wife through the week until I change it this weekend. Well when I went to top the oil off I found a ton of yellow gunky sludge in the oil cap. (see pics below) Then when she drove to work the next day she said that the "check oil level" light came on whenever she turned off the car.

So, my questions…
1) What could be causing this nasty yellow sludge?
2) Why is there an oil level light when the levels are fine?

Perhaps a CVV/oil separator unit issue?

Also, don't know if this is related - WHITE SMOKE...
We had gone through a carwash late on Saturday night, then parked the car in the cold garage…

The next AM we fired her up to go to church and there was a ton of white smoke billowing out of the exhaust, filling up the garage. When we left church the same thing happened in the parking lot, however it has not happened since.

White smoke usually indicates a coolant issue, but perhaps it was slightly blue – indicating burning oil (but looked white with the regular exhaust steam in the cold MN winter). Or perhaps it was just condensation in the exhaust from the carwash the night before (but why would it happen in the church parking lot after 15+ min of driving and the vehicle being well warmed up on the way to church?)

Just want to lay everything out there & make sure it's not a head gasket or something major.

Appreciate you all taking the time to read all this and thank you in advance for your advance, tips & answers.

Cheers,
Dan