OK so I went ahead today since it was a warm sunny day here in NY to pull my headlight out (removed bumper, headlight washers etc.) to see what was up.
Well I found exactly what the OP found with the servo arm out of the socket as i tried to put the arm back into the socket it just wouldn't reach. Upon further observation i found that the manual adjustment screw/control arm was broken (circled in red in picture). Don't think its fixable other than buying a whole new assembly. So i lifted by the xenon bulb area to pull the whole inner guts uip so i could try and get the servo back into the socket which i was successful but when i put everything back together still no good with the auto level (it does a little more now but not what it used to do. I will possibly replace the housing at a later date now that i know what the problem is and what i gotta do.
Thanks for the info timmahh, I would have brought it to the dealer in a few days to have them probably tell me exactly what they told you that everything is fine.
Monaco Blue 330xi - Terra Interior/6-MT/Sport/Premium/Cold/CSL's/M3 Spoiler Lip/Black Kidney's