kevin, that seal on the caliper piston isnt a good thing, they make kits to rebuild them. Yours maybe rusty from that bad seal and could be binding a bit causing the rotor to overheat and cause the shimmy. I agree that the thrust arm bushings are most likely shot, if you can see micro cracks in the rubber part its time for new ones. Get Lemforder arms with the 750 bushing pressed at bmaparts.com, call them and you wont have to deal with their online site. They also have the caliper rebuild kits.
95 E34 530I V2.37
===========
Those who make peaceful revolution impossible will make violent revolution inevitable.
John F. Kennedy