Not sure if this will apply here or not, but my xi wasn't working properly (no 4x4, abs, dsc). Car acted just like 2wd w/o abs, dsc. I used DIS to read the car and errors and it came up as transfer case (VTG) not coded (how in the world it ended up not coded is a surprise to me, although car was in an accident and maybe that knocked it out, go figure). So, I used SSS (see coding forums, particularly bimmerforums) to code my car. SSS coded my car just fine and now 4x4, DSC, and ABS work.
Anyway, I'm throwing this out there because if a switch is put in the transfer case wiring, the car may read it as non-functioning and shut off abs and dsc. Not sure if it will or not, but just a thought. I hope this switch works though!