I drive a 2005 X3 2l diesel six speed manual transmission and have had the car for about two years now. Since i bought it it has had a problem with the transfer case and i took it to ZF who diagnosed the clutch pack inside the transfer case as having too much slip or something like that iirc. I asked them to leave the plug disconnected as i disconnected it shortly after getting the car and have since been driving like that. At a stage i removed the propshaft from the transfer case to the front axle and drove like that for roughly 8 months until i picked up an oil leak from the transfer case. To my amazement the part that protrudes from the transfer case onto which the propshaft bolts is just a push on part that has splines that slide on a part inside the transfer case and this was leaking at the seal. Replaced the seal and fitted the propshaft as i was actually driving with a part that could easily have fallen out of the transfer case and loosing all the oil in the t/case and a possible seizure of the t/case. Have been driving with the transfer case plug disconnected now for about two years and 30 000 kms. No problems regarding handling, etc. The transfer case light is on on the dash but i have stuck some black insulation tape over the led inside the cluster. The speed control is working normally and braking and handling is fine as far as i can determine. Have no reason to think that my abs is disabled and handling is amazing for this kind of vehicle. By the way, i checked the thickness of the drive shafts on my car and compared them to the 3l diesel, and they are the same so am not worried that i may break a shaft under normal driving conditions. Have even towed my caravan to Hartenbos and back without problems. Regarding fuel consumption, my son has the identical car (same year 2l diesel manual) and we drove a similar distance in convoy and got roughly the same consumption on the obc, which is not always 100% accurate but gives a good indication of the consumption. As was mentioned, the front wheels only get drive when slip at the back wheels is detected so basically you are driving a two wheel drive most of the time. If you have no funny noises coming from your transfer case then i would just leave things as is and get a set of tires on same size wheels, no problem. Just as an afterthought, my son and i even have the same size and type of Michelin tires on our cars, all non run-flat. His transfer case is quiet as a mouse and his car has on about 130k kms. Mine is just under 190k kms.