Don't trust any sales rep at a local auto parts store that says his generic fluid is the same as the specific BMW fluid. Ask him what spec it meets (since BMW doesn't publish the X-drive fluid spec, should be interesting to hear his answer).

Long Term Update
 

Four years and more than 70,000 miles later my X-Drive transfer case is still going strong after my initial fluid change. The car now has more than 160,000 miles on it. I never did reset the adaptation values and have had no negative impact. I am thinking about doing another fluid change in the near future...

For those that are curious what the screens look like in DIS v57 when running the transfer case oil change "job"... see attachment. Takes less than 1 minute to run through the screens.

And here were Blackstone Laboratory's comments after my 2nd change (35k miles on the oil).
"Some very nice improvements turned up in this second sample from your transfer case. Aluminum, iron, and nickel are still just high enough compared to averages that we're going to leave them highlighted for now, but hopefully they'll keep improving like this in the future. The shorter oil run seemed to help, so we'd stick with this interval again. If metals get down to the average range, or start to steady themselves, maybe a longer run would be in order but for now, this seems like the way to go. No water/insolubles found, and the viscosity was fine. Better!"

Did they tell you what their definition of average was and how many were in the sample population? All transfer cases? All BMW transfer cases? All X-drive transfer cases?

I am just an amateur, but read this Thread about coding the reset, no so much about how the car may "feel" differently but about how the clutch will respond. Some sensor is telling it to error.

http://www.xoutpost.com/bmw-sav-foru...xperience.html

And who wants ANY errors in car, not that its worth paying the dealer......

Yes, that is one short-coming of Blackstone Labs. They do not define "UNIVERSAL AVERAGES" on their reports, so I don't know sample count or qualifiers, though you could always ask.

That is a major shortcoming.

Their recommendation to change the fluid appears to be based on a comparison with an average that doesn't mean much, if anything.

They are selling these tests based on fear, IMO.

The presence of wear metals in microscopic quantities in the oil does not require a change of fluid, as they suggest. If you left the same fluid in, and took four or five samples of that same fluid, over the same interval, then a change in the rate of wear metal increase would indicate something. It would tell you about the component, which is more valuable than trying to discern something about the fluid. But simply having the trace metals in the fluid shows nothing.

Where did this verification come from? All sources including my dealers are saying that my xDrive ATC500 should be filled with Dexron III - it's driving me mad as I want to make sure I'm using the correct oil :(

You are correct. The transfer case control module monitors the oil and determines when the oil needs to be changed.

There is no mention that is necessary to reset the control module in the Bentley service manual. That could be incorrect but since the control monitors oil condition it may be possible to reset it manually or let it do so on its own.

fluid for ATC500 is Dexron III?
 

I'm looking at doing this service on my '05 4.8is, and RealOem is showing the fluid as Dexron III: RealOEM.com * BMW E53 X5 4.8is Transfer case ATC 500. Is this correct? So I could use Dexron VI?