Sorry to hear about all this bro. Here's my take:
You may have grounds for a breach of warranty claim.
Hang it over their heads via firmly written letter before you pay a lawyer a retainer fee for something you can do yourself.
Tell them that this 2nd gear grind is a known problem with BMWs and even print out some of the threads talking about grinding 1-2 etc. Irrespective of your driving style, this condition existed in the transmission. Research some language on breach of warranty, and throw it in. Talk about their failure to investigate or take your appeal seriously and that you will give them an opportunity to cure the situation before you file a lawsuit with consumer protection act implications (check the laws in your state).
If they ignore your letter, you make it exhibit A to the complaint and file suit in court through a lawyer. Good luck and keep us posted.
2008 E92 M3 6MT, AW/Blk Ext., brushed aluminum
2006 E46 M3 ZCP 6MT Carbon blk/blk(sold)
2001 E46 325Xi 5MT Jet Blk/Blk (sold)