Well, just now got back around to this. I didn't want to risk damaging anything during riding season. My battery crapped out a few weeks ago (it's a WestCo from 2007) and since I had to take the tank off anyway I figured I'd address this.
The oil cooler line adapter that threads into the block was loose. In fact it was surprisingly loose. I unscrewed it fearing the worst but the threads in the block look fine and there are no cracks in the boss as far as I can tell. I have a couple questions before I put it back together. Looking at the microfiche it seems something was changed in '97 (my bike is a '95). The threaded adapter and the aluminum crush washer are only listed for up to '97 machines. There is no adapter or washer listed for post-'97 machines and the oil line changed in '97 as well. Does anyone know what changed and why? Was this leak a common problem with the '95 setup?
Also, there appeared to be some sort of sealant or threadlocker on the threaded adapter when I removed it. Anyone know what it was or may have been? I suppose it could have just been baked oil sludge but it seemed like a threadlocker of some sort. Also, I've had bad luck with some of the aluminum crush washers BMW likes. They require pretty high torque to seal properly, and on an older engine I'm always worried about stripping one again. My drain plugs all use plastic crush washers now with much success. Is the upper line the supply or return for the cooler? Could I get away with a plastic washer there, or atleast perhaps a copper one?