I don't know this motor well enough, but my guess would be there is an internal leak between the coolant passage and the combustion chamber. It would have to be in a non pressurized area, or the combustion pressure would pressurize the coolant system. They should have already caught this with a pressure test. With the catalitic converter you might not notice any vapor in the exhaust at all. The exhaust could be sniffed (called sniffing for head gasket failure) to see if coolant is being vaporized. The head gasket, head & block castings could also have a leak or leaks. It has to be going somewhere the question is where. If its not leaking to the outside. And not going into the oil. It has to be in the intake or the combustion area and going out the exhaust.
The dealer will totally hate this option, because there is no "small" fix, and might require a motor.
If the dealer doesn't find it and they don't have the ability to "sniff" for the vapor take it to a car dealer or repair shop that can. If they have a BMW car side they should have it as part of their emissions testing equip.
Best of luck