Thanks for the advice about the o-rings on the rear drum pivot arm. I didn't realize this tracked through the final drive oil reservoir.
When I removed the pivot arm about 15-20mls of final drive oil leaked out of the pivot arm hole, is that normal? Bike was level.
The next surprise was the absence of a washer from the inside end of the pivot arm. This washer appears in the BMW schematic and the Clymer manual. However it appears as though this unit is designed without the washer as the surfaces are a good flush fit and the splines on the outside end of the pivot arm would not fully protrude if a washer was added ?? The bike is Oct 1980 build date.
Anyway I was able to pickup some o-rings from my local BMW dealer 32c each, can't complain!
There are several grooves in the pivot arm but only 3 are machined with a square profile (good information from Snowbums blog)
2 are on the inside end which did not appear to leak, one on the outside end which seems to be the culprit. I have only changed the outer o-ring. Now I'm thinking I should have done all 3!
Anyway here are some pictures
First the inside of the final drive. Dry except for slight signs of oil around the bolt above the pivot arm? It was tight.
Here is the washer-less pivot arm with 3 o-rings
Now I'll just have to get out for another good run to see if the problem has been resolved.