The problem with the oil sight glass is a well know issue. In fact, some people recommend replacing the sight glass at regular intervals to avoid disasters like yours.
It seems like BMW has helped with the repair costs for some bikes that have experienced the problem. Your bike is well out of warranty. Still, this seems like a design flaw, given that BMW does not recommend any regular service for the sight glass. I would try to convince your dealer to go to bat for you and ask BMW to help you out. If your dealer won't do it, you might try another dealer.
Perhaps this will make you feel better. I put over 60,000 miles on an early model (5/94) GS oilhead with few problems. Don't give up on your oilhead yet! Good luck.
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