If you're handy with woodwork I can tell you how to fix this, I used to work in a shop that made and refinished wood wheels.
What has happened is that the wheel is coated in epoxy and over time the heat and sunlight streaming through your windshield have degraded the resin enough for it to crack, the milky look is the resin lifting away from the wood, when it is originally sprayed on it forms to the grain of the wood and when it starts lifting the milky look is basically the uneven surface shape if the wood grain cast into the underside of the resin, kind of like frosted glass.
The fix is, if you want to do it yourself; remove the wheel, carefully tape off the leather at the edge of the wood with blue or green painters tape and wrap the whole of the wheel except the wood with plastic and the smother it with white tape or duct tape to protect it, then take a heat gun to the epoxy (Being careful not to overheat it, the wood can be scorched even through the resin), and use a scraper or putty knife to gently lift away all of the resin. Take lots of time over this step, should take about and hour or so.
After you are done there you need to source some good Polyester resin, a close matching wood filler if needed, and lots of sandpaper.
Anyhoo, the resin I used to use came from a company called Hastings Plastics in Santa Monica, Ca, and we always used a filler made by a company called Mohawk. Next you fill any cracks in the veneer on the wheel and gently sand the fill, try to apply the filler like buttering bread to minimize the sanding needed, this way your wood won't need staining, and then clean with a tack rag or a cotton rag with some alcohol on it and apply a good 2-3 coats of the resin allowing to dry in between coats, sand with 150 grit before recoating for a better key, then when the wheel has enough coats applied use 150 through 2000 grit sandpaper to level and then remove scratches, after 2000 grit the surface should be a uniform dull finish with no visible scratches, and then you use your favorite polishing compound on a microfibre wheel to finish it off.... et voila!
If you're not handy and you happen to have enough money to do it (Can't tell you how much.... sorry) then get in contact with my old boss, he's the best in the business: http://www.rau-autowood.com

Hope this helps!

Kevin

• E39 Wooden Steering Wheel Crack and fading - chunnel 2007-06-30 04:11:54 (283 views)
  • Re: E39 Wooden Steering Wheel Crack and fading - chunnel 2007-07-30 13:00:18 (140 views)
    • I think this repair will be found in the 'twilight zone'... - bosoxfan 2007-08-02 16:20:31 (165 views)
      • Re: I think this repair will be found in the 'twilight zone'... (pic) - chunnel 2007-08-07 14:42:07 (194 views)
        • Re: I think this repair will be found in the 'twilight zone'... - limeyexpat 2007-09-29 09:02:59 (101 views)
        • Re: I think this repair will be found in the 'twilight zone'... (pic) - chunnel 2007-08-07 14:43:03 (174 views)
          • My guess - bosoxfan 2007-08-07 20:14:48 (141 views)