Water in the Passenger Quater Panel.....
 

I got water in the Passenger side rear quarter panel, but it is not on the very bottom. Its on the top shelf (directly below the fuses). I have read a lot of threads about water coming from the sunroof and so forth but they seem to work fine. Could it leak from the rear window itself?

Definitely check the drains. Run some water in there and check for leaks or blockage.

I can't remember if water from a leaky sunroof cassete would make it all the way back there. Do some searches.

Yes, check the seal around the rear hatch too.

EDIT: Here's one of the better threads.

http://www.xoutpost.com/bmw-sav-foru...y-x5-help.html

ahad exact same problem r a pillar drain kinked remove conver from a pillar you will see kink 15 min fix