torque converter?

It shifts fine through 1st and 2nd. And Reverse engages normally, no sounds or clicks or anything like that. I'm not shooting down any theories - just trying to provide supporting info.

It's worth a tow to the dealer, don't you think? Especially when you're only 2 days out of warranty.

I think you have filled in too much oil. Have you followed the correct procedure with the engine running and the correct oil Temperature 35-45 degrees. If you filled up when the transmission was cold, it is too much oil on. it has possibly destroyed a simring or gasket.

As an update, I've been doing some reading and searching on various forums and differential failure sounds way different than what I'm hearing on forums and youtube. That sounds like a high pitched gear whine. This is a low, dragging/grinding noise that vibrates through the floor. From what I've been reading, it could be a wheel bearing. I initially thought, and so does my wife, that the sound is coming from the right rear.

I've recently put new tires on, within the last 4K miles and they recommended an alignment. I had scheduled to take it in to the dealer tomorrow. Since I bought the car, I've noticed that the right rear has a bit more toe in than the left rear or any of the front tires.

Sounds like a wheel bearing but could also be too much backlash on the diff.
I would jack front and rear and set the X down on jackstands.
Should then be easier to diagnose whether wheel bearing or differential.

It wouldn't take much to jack the rear wheels up and shake them down looking for bearing slack. And the rear diff noise would be a high pitched whine at higher speeds...

But it may be worth the trouble to tow it to the dealer for a diagnosis, then when you get the price on what it needs you could then ask about goodwill since the warranty just ran out.

sounds to me like you need to replace your bearings in the back. if you roll to long it will mess up everything. rightnow its just the bearing. ( from what i can hear) its not a easy job but if you do your own work it should be a few hour job.

Thanks so much for the reply guys. I am going to jack it up in an hour or so and check it out. One thing that is pulling me away from believing its the wheel bearings is th smell of burning gear oil. Could this actually be the diff just over stressed or burning bearing grease?

I think it is your UNIVERSAL JOINT.
behind part nr.2 RealOEM.com BMW E53 X5 3.0i Drive shaft, single components, 4-wheel
front part nr.1 RealOEM.com BMW E53 X5 3.0i Drive shaft, front, single parts
oil smell, I believe is a different problem from too much oil on the transmission and now drip down on the exhaust