I had a similar problem with my E36 window antena, only mine was causing problems with both AM and FM.
The problem with mine was the antena lead connection where it went into the antena amplifier.
The amplifier is fitted in the trunk under the parcel shelf on the E36, is possibly in the same place on your car.
All I did was unplug the lead give it a quick clean and refit it, the radio has worked fine since then.
One more thing my local BMW dealer told me that the window antena's have been optomised for FM reception as that is all they use in Europe.
Not sure if that is true or not. If your car was made in America it might not apply.
Hope this helps
Cheers, Rossco.
