You can purchase an inexpensive tool on Ebay that clears the airbag light. As mentioned, the Peake tool does not have the capability.

air bag light
 

you have to buy the reset tool or take it to dealer.. I just ordered my tool yesterday from Peake $ 184.00

I have this one and have reset the airbag twice with no problem.
Airbag Scan Reset Tool B800 SRS Fault Codes Reader for BMW 1994 2003 x5 Z4 E39 | eBay

dammit - I didnt know the Peake R5 is worthless

just so I cover my bases - I installed the new airbag to another car and no codes. so it must be just a reset since the code the Peake picked up mentions Stage2 Driver Airbag

I was looking at this initially and decided to buy the more specialized peake tool. is this really better than the Peake R5??

http://i.ebayimg.com/t/Airbag-Scan-R...eh!~~60_12.JPG

FYI--If you disconnect the negative battery terminal before you remove the air bag and do not reconnect the battery until a working appropriate air bag is reconnected and in place, the air bag light should not be activated.

IMO the Peake tool is better. I only use the tool you note to reset the airbag. I assumed the Peake tool would reset the airbag until I needed to do so. Recently I dug out a Windows based computer and ordered the INPA software to better diagnose problems and clear faults. That was based on many references here to the INPA suite capability. The recommendations were to buy the software from the Ebay seller from Hungry.

from Romania... but, hey, who cares, right?... lol...

Oopsie, you are correct. Should have looked at my Ebay confirmation.

Correct - thats exactly how I did it. Right around the time I installed the cutoff switch..

I have swapped steering wheels+airbags around 6 times(3x for E39; 3x for E46). This is the first for the X and I get a code first time. And I cant seem to clear it with the Peake tool, nor will the code go away even after I reinstalled the original wheel+airbag.

I was hoping I can get this figured out so 1)I dont have to go to the dealer and 2) so I dont have to visit my indi 30miles away