I think we can say the vanos is not preventing the valves closing . Carbon deposits are more likely to cause that .
Problem sounds electrical to me . Or could be many things . There are knock sensors on the heads under the intake manifold which can cause problems . Not saying it`s these but just maybe a possibility .
The vanos could be the cause as you have discovered but I think you really need a definitive answer .
There are 2 BMW techs on this forum could give you a good idea of what to check . They are not around much these days . Weasel and Killcrap are their usernames .

Well the vanos is operated by oil pressure. So maybe the vanos is leaking internally (search vanos repair, I think beisan systems? not for a repair kit but for the symptoms) and that first 200 rpms bring the oil pressure and volume up enough to over come the amount of oil the vanos is leaking internally?

Or maybe the solenoid is sticking slightly . The vanos system function is purely to smooth the idle . the moment the throttle is applied is when the timing is adjusted .
I read something about it years ago , just can`t recall every detail at the mo .
The default position upon failure is set for higher rpm so it could be the cause of the misfire at idle . And as bastereo says , it could be a hydraulic leak .
Really needs some digging to find more info from someone who has experienced this .
I`m sure there will be a 7 series owner with the answer as these guys usually come up with answers .
Good luck .

Wow, I thought you had it running somewhat better. Were all those codes current, or were they pulled up from the fault history?

I still think switching the banks of the crankshaft sensors would be a good, almost free, test that could rule out that problem.

This is all SO similar to problems I had with my G35. Bad grounds actually caused several coil packs to fail. They were melting, and the outer plastic shell distorting. Another quick, (and free,) test that I would do in your shoes is to check the ground straps on the misfiring bank. You know those little ground straps that bolt down to the coil packs in the center of each head? Disconnect each one, and connect a VOM to each in turn, with the other lead of the VOM connected to a good ground, (like the post on the top of the shock tower). Set it to Ohms. You should get NO resistance. If you get resistance, that could mean damage somewhere in that harness that provides power and grounds to the the coil packs and injectors.

I had been studying the Beisan system on the repair procedure but the symptoms they give below don't match my issue:

Symptoms

Cold start vanos rattle.
Warm idle vanos clatter, similar to diesel engine.
Loss of low end torque/power and uneven power delivery.

I thought the vanos would throw its own codes when there was an issue with it.

The only codes I pull from the ODB II are the misfire codes, the Indy shop was able to retrieve all of the other codes.

I will check the ground as you suggested. Thank you.im assuming you mean the braided ground and not the brown one coming from the wire harness that bolt to the same post as the braided ground.

I would check the stud they bolt to....I was wrong to suggest the wires themselves. While those could be a problem potentially, they are not that easy to check. (You'd have to get a wiring diagram and figure out where they go, then check at both ends). While it seems obvious that a stud mounted in the engine would be a good ground, that requires the main ground straps on the engine to be good. It is critical that the coil packs have good ground.

I hope I did it right because after I disconnected the braided ground from bank 1 and 2, I connected my VOM to the driver side braided ground and touched the other end to the ground post on the inner fender wall. The numbers immediately jumped up, went down to zero and as I moved the tip of the VOM connector around the numbers jumped up and down.

I tried it on the passenger side with the same results.

Try testing between the stud in the head that the grounds attach to, and the chassis ground on the shock tower. That should read 0 Ohms....steady.