So, Before I ask for your advise, let the new guy introduce himself.
 I'm New Jersey born and raised, spent 4 years living in New Hampshire and Boston. Living in Florida for the past 25 years.
Been riding bikes since I was 12 and I'm 59 now! Bike history:  Honda Mini Trail Z50, ct70, Sl70, dt185, sl175, CB350, CB550K, Katana 600, VFR750F, 2 Harley Davidsons (currently a Road King) and now my first BMW: 1991 k100rs 16 valve.  I still have the VFR too
The BMW is a garage find with 7900 miles on the clock.  Replaced all the seals, tires, brakes lines, rear rotor (it was warped) and master cylinder. Rear tire spins freely while bike is on its center stand with only a negligible audible intermittent rub on the rear brakes rotor.  Calipers bled clean and are not stuck.  Brake pedal functions fine with about 2 inches of play before engaging the rear brake.  I do not ride with my foot on the brake pedal. According to the shop manual, ABS is functioning correctly as well

Here's my question: Is it normal for the rear brake rotor to be hot to the touch after normal cruising around town? If not what could I have missed that would be causing the issue?
Any thoughts on the matter would be appreciated.
Kurt

How hot is it?  Can you hold your finger tips against it without having to pull away after a second or two?  That would indicate a temperature of 135F or less.  Does it burn them after a brief touch?  That would be a temperature above 165F.

Is the Final drive housing hot as well?  There is going to be some heat generated in the final drive that can be migrating out to the rotor. 

An interesting test would be to put the bike on the center stand, start it, and run it a while in 5th gear at about 2000 rpm.  Then see if the rotor is hot.  Running at no load should create minimal heat in the final drive, but if there is any brake drag, that will make the rotor heat up.

could be interesting to find out what type of rear disk you have

there have been a few changes to the "fitted as standard " over the years

perhaps you have the solid (un vented -un slotted ) type
it appears from what I have seen so far that the slotted types go through pads quite quickly , or show significant wear in the disk  and I believe changed to the solid types after a review  perhaps about '86

the one contributing factor to brake binding that I  have noticed here in the forum , is the master cylinder fault

let me explain

whilst the piston might pump fluid quite reliably, and retract to what seems normal operation , there is an "equalizer hole " built in to the master cylinder  just a bit lower in the bore than the main reservoir feed , almost invisible to the naked eye ...and even with assistance hard to locate after all these years or use .
in most instances this equaliser hole becomes blocked with crud , worn rubber, poor fluid maintenance , and just plain lack ofa regular flush .. sound familiar? 

with the bypass - equalizer working properly , it lets the callipers relax away from the disk ...without this action, binding is quit common , in fact ..bleeding the rear system can become problematic in many instances .

our old mate rossko  delved into this issue and finally found the offending "port "  after much searching

there is a thread in here that follows the original post (perhaps you could use the "search feature " to locate the orginalposts

but heres the "found " picture .

we had surmised that a pin pricker- portagas valve cleaner  type of tool would aid in the cleaning of the equalizer hole . as there is a bung for the reservoir feed into the master cylinder , that doesn't let you access that equalizer hole ....like the front master cylinder reservoir does 



it may not solve your particular ..issue... but I believe that if you get the working parts of the system working properly you just may minimise the
effects on the rear disk brake wear-heating issues

good luck

The other thing worth checking for is crap in the caliper preventing the pads from moving freely. I did strip one rear caliper where there was so much build up of dirt and rust (from the pad backing) that the pads were permanently in contact with the disc.

Another thing you might try is taking off the brake line and cleaning it out to make sure there is no crap/crud in it.