[Alex323Ci]

yes looks like the front input shaft seal. this isn't that easy. but like you've heard the whole diff needs to be taken out and then put back in after the seal changed. but for 5hrs of labor x $120 hr that's only $600. so where this dealer is charging you another $500 for parts is :dunno:

you have a zhp and from the cover it appears to be a manual so a 3.07 ratio. you might if you want more performance consider a used lower diff ratio(higher number) which on a 6 speed works well. it will be much cheaper overall and most indy shops can do it for around 3-4hrs labor.

 

[Alex323Ci]

where can i get a used differential? or new? how much is it?

member Countdownbmw has a listing for some in the Classifieds-'Engine & Performance' section. He ships at a low cost too. The 3.38 will have the larger flanges so you don't need to swap anything.