My oil level sensor occasionally give a fantom reading on my 105k mile 325iT. From what I have read, the oil enters the sensor through a hole. It seems like it might be subject to oil sludge, but from the posts I have read, no one has been successful in fixing it by cleaning it, only a new sensor fixes it. I had never heard anyone suggest cleaning the connector, that would be worth a try.
If I have to replace it, for $100 for an unnecessary sensor, I think I'll just ignore the light.