You're not wrong Cam. NV125 issue only for 00-03 models.

For the ATC500 facelift Xdrive transfer case your only wear issues are with the worn plastic actuator gear in the transfer case, luckily (only need to flip gear for free to fix it)

Early 04 3.0's with the 5speed auto have a longer driveshaft than 00-03's but have the same problem of very little engagement in the case.

I was able to send mine to a guy here on the board and he welded on the longer stub that he has made. much longer splines than the one in the picture on this thread. I had to split the Tcase and trans to get it to go in but did not have to replace the hub in the Tcase as it still had plenty of good splines left.

Here is the original driveshaft thread
guy does great work
http://www.xoutpost.com/bmw-sav-foru...t-problem.html

Got my car back, shifts smoothly and drives great. One thing I noticed is that a soft "tink" sound I used to get at low-speed shifts is gone.

The shop told me that there was a crack in the housing of my transfer case, which is something they hadn't seen before. I got the BMW part 26-20-7-508-629 which they said is not the enlongated version.

When I mentioned the idea of putting in that version, they said it was only available aftermarket and another shop had installed two, and they both broke.

It was explained to me that BMW didn't originally pack in grease where the splines intermesh and this causes failure due to rust and metal wear because there's no lubrication to prevent it. They said that unlike BMW they pack the area thoroughly with grease and so far they have never seen a failure with one of their re-manufactured transfer cases, even after many years.

So, it's nice to have the car running well again. Even after all the unscheduled maintenance cost since the car came out of warranty 9 years ago ($12,055), as long as the car remains relatively reliable for another 5 years I'll feel like I've come out ahead.