Update - Finally got the car back with a new PCS after about 2.5 weeks in the SC. It's a 2.5 hour job (per billed rate).
At the end, I ended up not paying for it (would have been ~$2k), although it took many calls + escalations. It was officially covered as "goodwill" and not "HV Battery Warranty" although that is what I was pushing for. I ended up having to reach out to many senior service levels including up to the regional service manager + higher to get someone with decision making ability to review my case.
A couple things helped, that I'd recommend those who are stuck with this issue aim for:
1) Read around on the threads, but a friend helped me find a couple examples of this specific issue being covered by the "HV Battery Warranty" on their invoice. This was a huge helped as I had to point them to it.
2) Ask for the to be replaced PCS part back. If you end up paying for the service, this is your right and I believe it did have an impact on their desire to cover the charge. My sense is if there really is a design flaw this could help you in the future and they likely don't want these defective parts flying around for legal liability. If you end up paying for it, filing a complaint with NHTSA may help if they get many of the same issues. I'd even recommend referring to the bulletin below.
3) Check if your M3 falls into this Service bulletin for this same exact issue:
https://static.nhtsa.gov/odi/tsbs/2018/MC-10148850-9999.pdf
Finally, at the end the regional service manager really did want to help out. I made 2 requests that he follow-up with Tesla corporate with, that he said he already initiated and will keep me apprised of any change. Both of which I really thought were important for fellow Tesla owners who come across the same problem:
1) Have the service bulletin team re-look at the above SB. My sense is this is a flaw that extends beyond that VIN range, as my car (and at least 1 other friend) had the same issue with cars that were 4-5 months earlier than that window.
2) Have their legal/compliance team update the warranty agreement to specifically define the "Battery". This is EXTREMELY vague and makes it impossible for the service centers.
Good luck!