I found out today that the problem with the TransFailSafeProg kicking in has nothing to do with the transmission but that the Can-Bus system is the problem. As it was explained to me, this system acts as a sort of networking system for the car allowing everything to work together which is why I was losing my instruments when the car went into the TFSP.
They are going to try to pin-point the problem but apparently these are very low voltage tests that have to be done so it's difficult. Anyway, worst case is I'll have to replace the Can-Bus ($1200) and then have the local BMW download all the info to it as this comes from BMW of America and it is specific to my car.
Does this all make sense?
I am breathing a little easier knowing that I don't have to replace the transmission though.

good news!

CAN is a network that many device "talk" on. There is one device that is the CAN controller. Other devices just listen for a certain message, and then respond to it.

How did you determine thatt the CAN is bad? and what makes you think its the controller?

Being that the "Can-Bus" system is not really a maintenance item like oil/fluid changes, is their no chance for BMW to pick this up as a warranty repair? It's not like you forgot to change the trans fluid or forgot an oil change which would void a warranty claim, right? I guess you're right at least you don't need a new trans.

Good Luck !!

As far as warranty is concerned, it's a '01 e38 w/148,000 K so the warranty expired last year...figures.

This was the 2nd place I'd taken the car to, the first was pricing transmissions for me. The second Indy (Prestige Tuning in San Antonio) said right off that they didn't think it was the Trans and through a series of tests and process of elimination have traced the problem to the CanBus. They said it could be as simple as some contamination in the CanBus such as moisture etc...

Is it a fact that if I have a new Can_Bus installed I'll have to take it to BMW to have the car specific info downloaded to the Can-Bus? What kind of process is this? Time wise/cost?

I just picked my car up today at the Indy and have a March 7 (like a freakin' doctor?)appointment at BMW. The Indy says the problem is in the ECU Control Module.
At least now I can take it to BMW with the problem pinpointed and have it repaired/replaced.
Is this part available to buy aftermarket? Any Idea of what the cost is for this part?