I don't think anyone knows exactly what damage was or could have been done by driving the M5 with a faulty oil pump during the break in period, including BMW. I have asked BMW this question multiple times and while I understand BMW is passing the buck of responsibility to their suppliers the one person whose fault this IS NOT is the consumer. If there is really no damage done then extending the warranty will not cost BMW a dime but if there was damage done then BMW's consumers can drive their cars with peace of mind. This seems like a small gesture to make to resolve this problem and it allocates the cost of repair (if any) to the appropriate party.
At the end of the day, none of us bargained for this problem when we were agreeing to buy this car and BMW should feel lucky that this problem hasn't killed someone (assuming that is accurate).