The problem was the valve body, which is a hydraulic circuit body responsible for shifting the gears, etc. Seems some crap got into the small orifices and caused faulty shifting. The valve body was replaced along with new fluid, seals, tranny controller upgrade and some internal tranny upgrades, all under extended warranty. The warranty cost was about $2k alone.
Between 70k and 100k miles I had about $7k in warranty costs due to various failures: 3 hatch locks, speedo housing, centerline support bearing, front and rear sway bar bushings, rear shocks, ebox fan, front cooling fan asembly as well as the tranny.
Note that most of the problem items were made by subcontractors, not MB. We are now promised that the new and improved M will come with responsible subs but that remains to be seen. For planning purposes, I expect similar problems to happen to my MY02.