The brakes on these cars tend to rust from the outer edge to inside. I have tried many combinations of pads and rotors with the same results. Time to replace the rotors sorry to say. You say the pads are fine, then sand them down to flat with sandpaper on glass or similar flat surface. Inspect them for heat cracks, if cracked replace! Have not figured a solution yet. I have painted the rotors to prevent the rust from creeping but even baking the high heat paint does not seem to help.
95 E34 530I V2.37
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Those who make peaceful revolution impossible will make violent revolution inevitable.
John F. Kennedy