[JimD]

I have not rebuilt a BMW engine but I have a couple american cars. But I believe the main and rod bearings in BMWs are normal babbett bearings. Babbett is a lead based alloy and the bearings are cheap. The least I would expect is that all the rod and main bearings be replaced and I would want to see the crankshaft. It should be shiny. If it is hazed looking it needs polished and may need different size bearings. I would also want to see the pistons to see if there is any obvious damage but I doubt it. The cylinder walls are never lubricated great and probably continued to have a little oil on them. I doubt they are damaged and I believe that would apply to the rings too. The cylinder walls in our motors are aluminum, however. I would want to see that there was not deep scratches or gouges but if it looks OK and the clearance is OK, the bottom end may, indeed, be basically OK.

Another small thing to make sure is replaced is the seals on the ends of the crankshaft. They are cheap and running without lube could hurt them so I would want them replaced. Total materials cost for bearings and seals should be pretty small.

I would mainly be worried about things that are supposed to get pressurized oil. That is true of the main and rod bearings. Obviously they didn't get pressurized oil. As soon as that happens, they will start to overheat. Lead has a pretty low melting point. I suspect there is at least minor damage to the main and rod bearings and would be surprised if there is some lead wiped onto the crankshaft. If there is, it can be cleaned up.

In terms of new engine versus rebuild I don't know that I'd insist on a new engine. If the dealer is really willing to go through it throughly I don't think the engine and the end of the process will be worse than a new one. A lot of parts were clearly not damaged and it isn't hard to figure out which ones to be worried about (it's everything that gets pressurized oil when the engine is running). But I'd insist on an extended warranty, like 100K miles, for any damaged reasonably related to the dealerships mistake.

I don't know if you want it now but another thing they may be willing to concede is free maintenance for a longer period. Good Luck