I am confused as to the rusting band thing. I would guess this is your center support for the driveshaft. The heat shield above is a type of blanket thing that insulates and falls down over time with oil and trans fluid and can contact the guibo and shaft. The driveshaft is covered on the bottom to protect it from the exhaust heat.
My 530 had a grinding bearing noise and disappeared after a while. This was the actual disintegration of the center support bearing. Everything was quiet for a few thousand miles until the guibo started to fall apart. Once in there I saw the center support completely messed up. No clue how it worked so long.
Just replacing the center support and guibo fixt it all. Might want to replace the pilot guide in the front of the driveshaft while doing the guibo.
95 E34 530I V2.37
===========
Those who make peaceful revolution impossible will make violent revolution inevitable.
John F. Kennedy