Thanks for the feedback everyone.

Curious why you say this. What properties about the diesel make it that much better....or what am I going to miss if I use the 35i?

he meant that the diesel is just doing the job,no questions asked.The 35i may do the job Ok,may do it excellent or may do it poor.In my mind the closer comparison is between the 35D and 50i,with advantage for 50i on the power side and disadvantage on the efficiency side.Maintenance and repairs may be a wash.

Neither! Sell both and get a 50i and tow with that :nanana:
Only kidding…sounds like you already have 2 nice X5's. The diesel would probably be the better choice but your 35i is newer and sounds like you'll keep it longer. Given that, I'd put the hitch on that one and just go with it. Might not be the best towing vehicle, but it'll get the job done and you won't have to worry about moving the hitch from one vehicle to another.

It is torque that sustains a given speed, correct. But it is wheel torque, or rim pull, not flywheel torque. Transmissions multiply that engine torque. Just means you may be in a different gear between the two models.

And with the higher hp of the 35i, that given speed will be higher than that of the diesel. The 35i can simply do more work.

What the diesel owners notice is that the vehicle doesn't need to shift as often. They describe that as feeling effortless. No argument. But it is still slower. And with the narrower power band of the diesel, and fewer gears in the transmission, it is a good thing it does have more flywheel torque.

If you're going to keep the 35i, I'd hitch that. The X5 is rated to tow the same regardless of the engine. I still think the diesel will tow more "effortlessly" and efficiently than the 35i, but ultimately they will be equally as capable.

Just towed the M6 home (6000# total weight with trailer & car) to Wisconsin with the 2011 diesel. 952 miles and averaged 17.2 MPG running mostly at 74 MPH. At 70 MPH it was running at 2000 RPM. It did seem effortless and I was very surprised at how well the towing went. I'm guessing there is no way a gas X5 would get close to the same MPG's.

Exactly.....
No way a gasser is doing that with the same ease (except if its the 5.0) ;)

So is this all I am gaining with the diesel...mpg? If so, mileage is not that big of a deal to me given the frequency and distance I will be towing.

No, not the only gain. Read everything above.
Seems like you really don't want to have to remove the hitch from the diesel in a couple years. Just go with putting on the 35i. You will be fine considering frequency and distance :)

Another analogy, better one.
Let's say you have a skinny fast guy on a 8-speed bike. Fast pedaling = more work done = high horsepower. He can pedal and go fast all day in any gear with relative ease. Sounds good, right?

Now, let's hook a small trailer with to that bike and load 200lbs on it.
Will the skinny fast guy be able to pull the trailer? Yes, he will switch to lower gears. Coming up to a hill, change to even lower gear and just pedal fast (high RPM). Will sweat a lot and need lots of Gatorade.

Let's say this skinny guy can push 300lbs with his legs in the gim, and pedal 300 times a minute. That's X5 35i with 300 hp /300lbf torque rating. A very good athlete compared to others, no doubt about it.

Then you have another guy, who can't pedal as fast, but got muscular legs that can overcome more resistance (torque). This guy can pedal "only" 265 times per minute, but can press 425 lbs at the gym. 35d rating.

Put this guy on a 6-speed unloaded bike. He'll move slower than previous guy due to less frequent pedaling. A hill comes up. This guy just pedals at the same speed and is able to overcome resistance due to stronger legs. A trailer is hooked up. This guy is able to overcome that, too.

Right, higher speed. With unloaded vehicle. Let's hook up a boat and watch gearbox frantically search for gears an RPMs redline, all to maintain that speed. A lower torque vehicle cannot maintain speed under load.

Not necessarily slower when under load.

P.S. This is getting nerdy