I owned an '89 325i for about 18 years. One mod I did that you may not think of is converting the ellipsoids to Hella H4s. All you need is standard light buckets from a 318i, two Hella relays, two Hella european H4 globes and two Hella high beam globes. Run 80/100 watt bulbs in the H4 globes and 100 watt H1 bulbs in the high beams. The light spread is fantastic and light volume almost as good as HID (400 watts of high beam). The relays are needed to trigger the high beams in H4 globes because the ellipsoid outer lamps never had high beams and you need to add the circuitry.
Have fun with the car. I'd suggest a Metric Mechanic M20 hi-po motor rather than an E36 M motor swap. The MM M20 motor is a plug-in to the ECU. The E36 is not so easy.