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(sorry to Necro an old thread)
The rear spacer is all about ride height, it just raises the car. Remember that the springs are inboard quite a bit, so 1/8" at the spring is going to translate to quite a bit more at the actual wheel, since the suspension is a long lever arm. The extensions to the spring cup are just to make sure the spring stays in place.
If you look at the parts diagram, the factory springs are ever so slightly barrel shaped. This gives them a bit more travel before they coil bind. Dinan's springs look like they are cylindrical. Will they coil bind before you hit the bump stops? Probably not.
On the E60 M5, the Dinan kit included a billet steel spring perch in the rear because their stiffer springs deformed the stock perches. This doesn't appear to be the case with the E9x M3.
Personally, I'm having a REAL hard time justifying Dinan at $1200 vs eibachs at $280 or so + e36 bumpstops. Shaving the guide supports is not a great idea with the Eibachs, since it will not increase travel at all, (rather just lower the car more.) Dinan gets to use a taller spring to compensate.
Dinan's springs are Hyperco.
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