Deleted account 191119001
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This issue has been going on for years...
https://forums.bmwmoa.org/showthread.php?37675-Final-drive-gator-not-sealed-water-in-swing-arm
Post number 20 in that thread is interesting to read, may not be relevant today, but who knows, read below
Actually -- the boot should seal off the driveshaft.
The open hole in the rear-drive bottom is outside the boot. The accordian boot fastens at the rear-drive to the round boss the input shaft is in - and on the swingarm end, it has a lip that goes inside the casting, and is held moderately tightly in place with a plastic expanding ring inside.
As noted above - if this ring is damaged (or not installed correctly) - then you do have a chance for water intrusion (and no way for it to get out..) and that's what I think happened in this instance. The front of the boot to the swingarm was mentioned as being a loose fit ("and looked like the large swing arm side was not sealed") - allowing the water to get in. Since the rear seal for the boot is sealed to the rear-drive, it became a reservoir to keep the water in.
A possible cure would be a small (1/8") hole in the last pleat of the boot near the rear-drive. That should allow any water to drain out, and unless you're submerging the rear drive regularly, minimal water would intrude. Or just make sure your plastic ring is properly in place and put a bit of lithium grease on the casting surface to help seal it.