Because of some weird problems with the board, and an itchy trigger finger, I accidentally blew away the previous thread where I originally asked the question. So I will add Bubba's post here as I had it saved in an Email I had sent off to my niece.
Here's bubba's post:
She shouldn't have been able to get the key out of the ignition with the shifter still in reverse. If it is actually still in reverse and she did get the key out it sounds a lot like a broken steering lock.
Though what's confusing me is the fact that the tranny lock should only be engaged while it's in park. But it could be possible that the steering lock broke while the tranny was in reverse and broke in a manner to allow the tranny lock to engage even though the tranny isn't in park.
I can't tell you for sure though as mine broke when the tranny was in park.
You can make it temporarily driveable if the steering wheel isn't locked.
You need to take the shroud off of the steering column. Disconnect the tranny lock cable off of the right hand side (it's next to the ignition cylinder) of the steering lock. You can then push the button on the end of thee cable in to disengage the tranny lock.
And then you have to take the ignition switch off of the steering lock by unscrewing the two very small slotted screws, one on each side of switch. Then you can pull it off of the steering lock and use either a large (like a #3 philips, or a larger slotted) screwdriver or even the key to put into the hole that the steering lock engages and turn the ignition switch with that.
If the car has EWS II you'll have to have the key very close to or in the ignition cylinder as the EWS II receiver is around the ignition barrel.
But if the steering wheel is locked and the steering lock is broke you won't be able to unlock the wheel until you take the steering lock off.
You can take the steering lock off and pull out the cam that locks the wheel and put the lock back on as a temporary repair. But you'd still have to pull the ignition switch & tranny locks off the steering lock and use them like I mentioned every time you wanted to start the car.
Once the steering lock is broke there's no disengaging the tranny lock or turning the ignition switch while everything is still together.
You might want to ask if the steering is locked. And does anything happen when she turns the key to the start position. If she turns it to the start position and gets no resistance, and gets no radio, no cluster, no dash lights etc. then the steering lock is broke.
Unfortunately I'm rather sure that the steering lock is broke. A new steering lock is about $150 at the dealer. And you'll need a set of snap ring pliers and a dremel tool to fix it. You'll need the dremel for the anti-tamper bolts on the top plate of the steering lock.
If buying a new steering lock is in order, make sure they get you the one for the auto tranny, and make sure any other steering column parts are for the airbag column. You might want to get a new bearing (#2 here http://www.realoem.com/bmw/showparts...& hg=32&fg=30) and possibly a new snap ring (which'd be #5).
Steering lock is #2 here http://www.realoem.com/bmw/showparts...& hg=32&fg=30
And the tranny lock cable is #13 in that diagram.