[nk_zhp]

Wheels speed sensor is likely the culprit, but can't be 100% sure. You ABS "thinks" the wheel isn't spinning. This is as I said likely but it's hard to tell for sure.

 

[nk_zhp]

I shouldn't have used the word ABS, it could be the ABS DSC, DTC or whatever the marketing team calls the software in the car in this particular moment in time. Bottom line is that since you said the suspension assembly on that wheel was recently touched, chances are, it's either a mechanical issue with the brakes, which based on description doesn't sound like it (it's too "digital" in nature), or some electronic sensor in the area. The Pulse Generator is very likely. It might either be faulty or mis-mounted or badly plugged in.

"Once these lights are on i can drive and brake with no problem." - this statement is a DEAD giveaway that the problem is digital in nature. When the car detects an inconsistent reading from one of its sensors it disables all assist functions. So if the system detected a pulse from 3 wheels but no pulse from one of the wheels it knows something is wrong and it can no longer rely on those inputs to make decisions. The brakes grabbing is likely a DSC response and not ABS, but that's irrelevant.

 

[nk_zhp]

The wheel speed sensor or pulse generator using BMW terminology is mounted onto the wheel spindle assembly, where the brake rotor is, but mounted from the back side. The electric wire for this sensor stretched from the wheel spindle assembly to the car's body inside the wheel well resembling the path of the brake lining sensor.

it looks something like this http://media.photobucket.com/image/pulse generator e46/JackChristian/craigslist%20items/IMG_3604.jpg. One side is mounted in the back side of the wheel spindle assembly. So if they removed any front suspension components they likely disconnected the sensor and either forgot to connect it back, or didn't do it correctly. Maybe it got damaged as a result of whatever cause the suspension work but it was not replaced.

Again, this is just some direction to go in, nobody can determine your exact problem via the internet.

 

[nk_zhp]

So just to be clear, you are saying you had the problem with both the sensor that came on the new (but used) assembly and the one that was on your original/old one?

It is certainly possible that both sensors are damaged in the same way, but likelihood is low. Alternatively the connection itself where this sensor plugs in might be weak, which could explain why both sensors behave the same. The only other possibility is that the teeth inside the spindle assembly themselves have a problem and the sensor is just a victim of misreading the rotation speed of the bearing.