Appears there are two choices; replace the occupancy sensor or bypass it...
Here's a link to buy a bypass device: BMW Airbag Warning Light Passenger Occupancy Sensor
The good part: it's cheap and easy, the bad: all bags will fire in an accident. However, "cheap and easy" is (unfortunately) unacceptable in my garage.
So I've opted to buy the passenger seat occupancy sensor, remove the seat, pull off the seat cover and replace the sensor. As you suggested, the seat is out of my '99 528i and the part (the 'bit" for ya'll) cost $181 USD here in the Colonies.
The other failure point is the driver's seat belt - which makes a connection to the airbag circuit. There is not an "occupancy sensor" to fail on the driver's side...God love German engineering logic. Our local 2002 "Gruppe" happens to have a Peak SRS tester and my issue is apparantly the more common fault: the occupancy sensor.
I like this site: Pass Seat Airbag Sensor Mat replacement DIY - Just finished.......
You can actually make the device sold above...it is nothing more than a diode, a resistor and a small capacitor...sizes, capacities on the web. It's about $7 dollars worth or parts...I mean bits.
Wish me luck. I'll send a few photos of my seat project.