Not that I doubt you Dave, But I don't think the Z3 used the M42. Even though its engine variants are basically one in the same, I believe the Z3 used a 1.8L M43 in early days and later used the 1.9L M44, and of course the 6 cylinders. When it comes down to it though, not much difference between the M43/M44 and M42.
Michael27, as mentioned above, you should have an M42B18 motor. When I hear the engine "Blew up" I cringe and have a mental image of a Bright red oil lamp, rapid destruction of front case, rails and roller parts everywhere. We can only hope its something to a lesser extent.
Well since your considering a swap anyway, I would pull the valve cover and top timing case and take a quick look. Even with just the Valve cover off, you should be able to check and see if the cams are badly out of line. Check the cam squares on the rear end of the cams to make sure they are parallel, with the Engine at Top Dead Center, you should be able to lay a ruler flat across the squares. Another indicator, although Im not 100% sure this is accurate, your cam arrows should be roughly parallel.

Sorry couldn't find a suitable picture of the cam squares.
Also someone please correct me, if my cam alignment clues are inaccurate. I wasn't 100% sure on my tips, its been a year or two since I’ve been under my own valve cover.