I recently changed out my steering angle sensor (2004 HSE --> BMW sensor) as I had the famous Christmas tree lights on. Took me and a friend about two hours and it's a job you don't want to do on a regular basis as reaching one of the bolts is very hard (upper left steering column bolt). As it turns out the culprit was the slip ring in the sensor - one of the contacts has broken off and didn't make contact anymore. I had purchased a used BMW sensor out of an E46 just to have one on hand in case the slip ring on my sensor was good (meaning the electronics had failed). The slip ring in the BMW sensor also showed some wear - clearly prone to fail again in a few thousand kilometers. The "comb" is so fine and thin that it seems to wear quite easily.
Luckily I found a guy from Germany on Landyzone (username Trompka) that sells a heavy duty version of the slip ring with a new design of the metal contacts. Looks much more durable! Changed out the new design slip ring with the one from my LR sensor (takes a few seconds) and re-assembled everything. Reset the steering (turning the steering wheel lock to lock a few times and voilà all lights and codes disappeared!

The new slip ring works as it should and will probably outlast the rest of the car
Moderators: not sure if this post qualifies as advertisement or not. Just want to make others aware of this quality part (I'm not related in any way to the seller and/or get anything from him).

here's a comparison of the BMW ring (top) and the improved version of Markus:

Click image to enlarge