BMW Mystery

Automatic transmissions needs a fluid to apply the clutch packs and move the various valves. That will occur regardless if the fluid is transmission fluid, water and antifreeze, or apple juice. Transmission fluid is the only one of those that will lubricate bearings and moving parts, so while it might seem to be working okay for now, the water is promoting corrosion of metal parts and the antifreeze will slowly dissolve the fiber clutch plates. Water can make the plates stick too well resulting in harsh engagement. Water boils at 212 degrees F. Transmission fluid can get hotter than that. Steam is a vapor and vapors can be compressed just like air can. Air in the transmission's control passages will kill a transmission by compressing under pressure rather than applying the clutch packs solidly. That results in slippage that you may not even notice right away, but it will continue to get worse.

Transmission fluid, (or engine oil) in the cooling system will rot the rubber heater and radiator hoses from the inside. That can take months to show up as a soft, burst hose. Just because you don't notice anything unusual right now, there can be damage occurring that will show up later as a sudden failure.

This type of fluid mixing occurs when the transmission cooler is built into the radiator. Some cars use separate external transmission coolers, but most use coolers inside the radiator. Those internal coolers can corrode through, especially on cars that don't get the coolant replaced every two years. The water pump lubricant and corrosion inhibitor additives in antifreeze wear out in about two years; that's why it needs to be replaced. Acids build up in the coolant when those additives become depleted.