As I understand your issues from the photo above, you seem to have a superfluity...

Looks like the PO broke the aluminum oil filter cover, so he backed it up with the steel cover off an older model. That steel cover is not supposed to be there. Then he substituted the round red o-ring that came with the off-brand oil filter, for the famous square-section "White o-ring" from BMW (which has to be ordered separately). And that don't look like the correct shim either. Of course it may really need a shim that thick.... you'd need to do your own measurements to know.

And on top of all that... the red o-ring has been pinched.

And this is why you do your own work....
Because if a shop told you your bike was screwed up that badly you'd think they were making it up. 😛

Thank you. The red o-ring is white, the red is gasket sealer applied. It is a square one however the filter from EME came with a round o-ring. Guess i'll order the square one. I'm hoping the engine is still okay. I'll keep you posted.
And I guess when you buy a new to you bike you should always do EVERY maintenance item over. The guy said he had replaced the oil filter!
Thanks again, Dave

Thank you. The red o-ring is white, the red is gasket sealer applied. It is a square one however the filter from EME came with a round o-ring. Guess i'll order the square one. I'm hoping the engine is still okay. I'll keep you posted.
And I guess when you buy a new to you bike you should always do EVERY maintenance item over. The guy said he had replaced the oil filter!
Thanks again, Dave

Thank you. The red o-ring is white, the red is gasket sealer applied.

Ah, thanks for the correction. My bad eye sight.

Your existing oil filter will be safe to re-use. It does if fact look new. But you'll need to replace that white o-ring. When correctly installed it needs no sealer.