Hi Everyone,
I know there were many post when searching the archives but nothing which matched my problem exactly. I checked fuse 21, all the switches, bulbs and door switches and nothing appeared broken. However I still didn't have 12V on the Red/white wire in the front reading light housing. My problem turned out to extensive corrosion in the splice point below in the harness below the rear distribution box. I repaired the harness and everything now works properly.
This is the harness in question
Simply untape the mess and inspect for corrosion
Corrosion
You can see here the white powder from the copper corroding. The one of the wires had actually broken free.
Repaired
Cut, strip and solder the ends all back together. Then shrink wrap and tape the harness back up.
Some Other Related Interior Light Links
Interior Lights Don't Work (1992 525 Wagon)
'92 525i Interior Lights Do Not Work
Interior Lights Revisited (Long Post)
Interior & Trunk Light Don't Turn on With Door
Hope this helps someone else out!!!