Originally Posted by GregW / Oregon
Second question is if this "friction modifier" reduces the limited slip performance? Seems like it would.
I think you are absolutely right...the noise is generated as a function of the energy required to overcome the friction between the clutch plates, in reducing the friction level by making the plates slip easier you are degrading the limited slip function.
I now suspect BMW created their own diff oil based on Castrol's SAJ-XJ (which already contains friction modifiers) with extra additives not because the diff requires it but solely to placate grumpy owners who complain about the noise.