Well i am not an Bmw owner but i will be!!!
By the end of this year i will get a 95' 325is or MAYBE a 96-97' 328is.
I know almost everithing about theme already.
SO in your case i think u can swap an M3 engine out of a junkyard (if it is easy to do. I don't know yet).
But, your car is pretty much awsome! be proud of it. It is not a race car. (^&*% Why not????) .Even thougnt i am interested to see what everybody else say about this.
well see ya!
Tito