Thanks for the reply.
From the diagram link you included the pipe is closer to Part #3 than Part #4. I do have the two hoses that connect to the Fuel Tank Breather Valve. The pipe in question is hard plastic not a rubber hose.
I am sure it is not a water or fuel pipe because it is not designed to be liquid tight plus I have all water hoses identified. I believe it is a vacuum or breather pipe. It could be a drain pipe. The expanded end has a rubber sleeve that is the same size as the pipe opposite end. It could be related to the Vacuum Reservoir/Tank or the Brake Vacuum system but with RealOEM, Chilton and Bentley's not showing a full set of diagrams or pictures I am at a loss.
Looking at
http://realoem.com/bmw/showparts.do?...15&hg=16&fg=10 It could be a drain tube/ pipe from Activated Charcoal Filter. I believe Part #3 is a small blue colored tube/pipe. Part #4 has a similar shape to the unknown pipe and it does fit the nipple on the filter.
Added Note 6-16-2012 The pipe in question has these markings: ITTAE FHS 12x1 > P [p.. or f..] letters in brackets faint.