A friend of mine has a 1997 5 series BMW ( in addition to his 300TD). He just had some minor work done on the BMW at the dealer and they advised him the car was " unsafe to drive". According to the note on his invoice the power steering hose and pump leaked and destroyed the steering rack. This seems very suspicious to me. Can anyone explain the cause-effect between a leaking hose ( and pump?) to make the rack fail? Seems like a lazy tech just trying to get him to pay for the whole system. It is making some amount of noise, but the dealership's solution seems a bit extravagant. It also seems odd that all three components fail together.

Well they do use rack and pinion on the BMW 5 series after 89 so I guess it could leak onto a boot over time and cause it to go bad allowing open up and cause foreign objects to get in.
Keep in mind one components failure could cause others to go as well. It's like replacing control arms but leaving bad shocks on. You just are going to kill the control arms.
I don't know the specifics of the newer BMW's but I would go to a good independent shop and get another opinion. Also post on Roadfly.com
If he is out of warranty why does he still go to the dealer?
my 2 cents

The dealer visit was to reset the "check engine" light. He has the tool for the maintenance light, but not the check engine. The cause of the CE light was failure of the O2 sensors. That part of the visit seemed reasonable.