BMW just called. They are planning to replace the transfer case and motor, though the tech had already left, so they didn't have more information.
Originally Posted by ultimate
just came up today. kinda paranoid about it too. out of warranty. the malfunction comes up after a long stop along with a little knocking noise from the front right wheel. i'm hoping its not something too big.
Your problem could jsut be a wheel bearing given the knocking from the wheel and per other posts.