Mine is a 2001 X5, The is engine is a little different but not tooooo far apart, as you can tell...

2001 X5, different but not that different... as you can tell....lol

Don't worry...There is a TSB out there on the BMW 4.4L engines that come in the 540 and the X5 which addresses the knock. Bad news is the noise is coming from a main bearing. Good news is it won't get any worse or reduce any engine longevity. My 1997 540/6 had is bad enough that I researched this to death and came up with the TSB. That 1997 540 was going strong when I sold it at 155k miles to my BMW mechanic who knew about the knock and TSB. Using a thicker Synthetic helped some but it won't go away. My next two 4.4L BMW's I specifically listened for the knock which about 20% seem to have.

Michael

Here is the actual TSB for the BMW 4.4L engine. This is extremely prevalent on the E39 BMW 540 which has a direct relationship to our X5 4.4L engines.

TSB - 11 06 97, 12/99

Title is "Irregular Engine Clicking Noise"

Applicable to all M60 and M62 engines.

Isolated reports of a loud clicking noise coming from the lower crankcase area, cylinder bank 5-8.

Noise also described as a loud irregular tapping... idle to 2000 RPM... not caused by mechanical damage... in no way compromises reliability...

Correction: Only if a customer complaint and noise verified, should crankshaft main bearings be replaced.

Goes on to specify bearing shells to be used