BAD NEWS M5!!! NEED HELP!! Long story appologies in advance

[i haz m5]

I'll start by saying hello, I'm new one here have used forums for all my previous cars and always found them very helpful so I figured I'd stop by and see if i could get some insight from some guys on here maybe someones had a similar experience and can suggest what i do in this situation.
I have a 2006 early model M5 Currently with 63k miles(out of standard 4year 50k warranty). So about 2 weeks ago my car randomly gave me an engine malfunction message for the first time "increased emissions, reduced power" it said. i thought this isnt good, then the car went into some kind of safe mode where the rev limiter went to 5,000rpm (possibly lower) and the engine and exhaust tone completely changed on the car. i was maybe 2 minutes away from my house so i said ill bring it back and schedule an appointment with bmw. then i heard a strange windmill type of noise which sounded very brutal whatever it was but it seemed to pass. i made my way home, made my appointment, and the car sat there for about a week until it was ready to go into bmw.
On Wednesday of this week I brought my car into Great Neck BMW Service Center in Long Island, NY, which is the new replacement for BMW Bayside Service. Unfortunately I no longer have the factory warranty but in buying this car i thought it would be insane to own it without some type of warranty so i purchased the most extensive Easy Care Warranty i could find to cover the car mechanically and figured I could handle whatever servicing it needed(oil, brakes, filters), basically anything but engine work. It looks like this won't be the case. According to the service manager, after running two diagnostic sessions and one compression test(all on my buck so far) several of the cylinders seem to show signs of having bent valves. He believes this may be the result of over revving the engine...., a build up of carbon, or a pressure issue with the cylinders(mechanical failure = warranty company pays).
Now my first issue, and this is the way i personally see it. how are all three of these not considered mechanical failure? Are these cars not designed to limit revs of the car and keep carbon out. If the car has never been modified or had the rev limiter removed why would i somehow be at fault or not have this classified as a mechanical failure. I do not abuse my car, I drive it very reasonably maybe that's why I'm in awe of all this but even if i drove like a lunatic thats what these cars were built for.

I'm beggining to rant, what I'd really like to know is are you buying all of this and what are my options here, so far its been
A) 2 diagnostic tests - $300
B) Compression test - $400
Next he'd like to look inside the cylinders which means removal of the engine $3,200 in labor
Followed by repairs he's estimating around $9,000


So far i've paid nothing because he's led me to believe that the warranty company will likely cover the repairs, for this he gave me a 90% bode of confidence that the issue is with the pressure. however now he does not seem as sure. Do i go ahead with the $3200 in labor. i have not even spoken with my warranty company, he told me he has and they will not cover anything until they know what is the cause of the issue.

Would also like to throw in that this service center has just started business and so far I feel they are off to a bad start. for the 5 days my car has been there i have averaged about 5 phone calls per their 1 return. I understand service centers can be busy but i need to know whats going on with my car, I've spent a lot of money on it and its now in your hands because i don't have the tools to work on it the way they can. I would just appreciate a call to inform me what is going on with it when you say you will and to be on my side. I know you guys are a business but I have a BMW I brought it to you guys because i thought i could trust my bmw service center not so that you guys can take my car start racking up a bill and not call me back to inform me whats going on with it.

There, sorry for the long story, it's fresh in my mind and I'm not too thrilled about the situation, it looks like after being $4,000 in i may not even know what caused the problem. If anyone can give me any kind of idea what to do in this situation I'd really appreciate it

[Noobish]

Seeing you still don't have a response, i would recommend going to Bimmerfest.com