My E23 picked up this bug last week. My trans guy says it is pistons in the valve body. Good luck. BTW I havn't fixed mine yet - I just drive one of my others.
Good - Fast - Cheap: Pick any two.
E23 735i; E32 735iL (X 2 - 1 Alpine White and 1 Glacier Blue); E34 535i; E38 735iL; R50 Cooper; R55 Cooper Clubman.
E21 318i; E30 318i; E32 735iL; E34 535i; E38 730iL; E53 4.4i