Terry,
Sounds like BMW may have had some troubles with inconsistent combustion temperatures, and maybe a quality issue in manufacture as well. Bad gas is an easy out on a lot of problems, (and often rightfully so).
My understanding is that the sulfur would attack the bond, as opposed to the nickel itself. A simple plating process, which relies on a mechanical bond, that has suffered any wear or damage could allow this to happen. In the mold scenario, the flakes would be an indication of a failure of the bond, not of the nickel. If I understand the nikasil process, it should not peel or flake. At least not without taking a lot of aluminum with it.(Give me a break, it's been over 25 years since I took physical metallurgy!)
What were the jugs off of? I just think that a sulfur problem would be a ways down on the list of suspects. It would be interesting to have a fuel and oil sample to see just what they were running on.
Why don't you bring a BMW to the next service school for us to tear down?