Hey everyone, I wanted to post and let you know the problem has finally been resolved. I changed the ignition switch and everything is back to normal. No more flickering battery light, no more flickering PDC light, no more pulsing compass display, no more intermittent starting in cold weather, etc.
Of course, while I was still waiting on my new ignition switch to arrive in the mail, the X5 went into failsafe mode on the way home from work while I was doing 75 on the interstate and shut off completely. About 5-10 minutes before this happened the battery light started flickering and then went solid red. I knew something had suddenly gotten worse... The traffic was heavy (rush hour) and fortunately I had just enough momentum to weave through traffic to work my way over to the shoulder. I could not get it restarted to save my life. To add insult to injury, it was dark and raining cats & dogs. I had to finally relent and call the tow truck to get her towed home.
Moral of the story: If left undetected long enough, a failing ignition switch CAN leave you stranded.
The other moral of the story: Evidently what can appear to be symptoms of a failing alternator/battery can actually be the ignition switch in disguise. If you have a flickering battery light and your alternator appears to be charging properly and your battery is testing good, it could be the switch. In any case, I hope this thread will help somebody who might be chasing down a similar problem. Thanks everyone for your feedback and replies, They were a huge help in trying to figure all of this out!
E30/M50 race car