There is a previous case with poor design that BMW still takes resposibility for: the non-reinforced 19" cast aluminum spoke front wheel.
(ref. The BMW Club of UK; Journal, September 2000)
This construction fault is so dangerous that BMW still trades in the 19" frontwheels - should there still be any on the roads. All are supposed to have been trade in back in 1979-1978:ish, but one broke on the roads in teh UK in 1999...
I do however agree that it will be hard to win a case of a broken sight glass though... it is kind of equivallent to broken oil-hoses on the /7 series. You do have my sympathies though. This engine failur is horrible blow for you
If BMW have not issued a service memo on this "problem", then you should be able to negotiate a "fair" deal; they stand for the garage work and you pay for the parts (kind of 50/50 deal).
It is worth trying