My R53 Cooper S has got handbrake issues - that is, it doesn't work. I've tightened the adjuster as much as it will go (and even put a couple of bigger nuts under the adjustment nut to shim it out), but it does't work for *****. I took the rear wheels off and noticed that the rare disks are pretty worn, and the brake warning 'error' light is on. I'm wondering if worn disks would affect the handbrake?
As much as the rear disks are worn, they look like they've still got plenty of life left in them. Is it worth getting an OBD2 tool and trying to reset the warning light?

 

I would replace the rear brakes. New pads and discs can be had for pretty cheap these days. Plus, brakes are a major safety system on the car. Get new brakes in the rear, and then see how the handbrake works. While you’re in there replacing pads, check the stiffness of the rear caliper pistons. If one side is sticking, or is more tight than the other, that can cause the hand brake to feel loose, too.

 

If the brake light is on, time to replace the pads (BMW says replace both pads and rotors.) When doing that I would check the action of the rear calipers - they may not be adjusting. The rear piston must be turned counter clockwise to get it back into the caliper. If one or more is frozen, that could cause **** work by the hand brake.
The brake light is triggered by a sensor that slides into the brake pad - when it wears against the rotor, the circuit is broken and the light goes on. A scanner won't help you there. If you're comfortable with your maintenance, you can just remove the sensor and short the wires together - but beware wearing the pad down to the backing.