Sad to hear that - the little BMW is a truly sweet driver's car. It's a toss-up though. With the title issues, likely head replacement and general unknowns, the BMW is heading well into the red. If it was me, I'd procrastinate!
Fix up the Subie like you said, then reconsider where you want the BMW to be.
BTW - I'm pretty sure you can drop the glove box door by unscrewing the four little philips-head screws above it in the dash. Sometimes that'll give you enough wiggle room to push the latch catches in with a screwdriver or long pick. The catch has a cheap pot-metal actuating lever that tends to crack. You can replace it pretty easily - the latch unscrews from behind the glove box door and comes apart into two pieces.
We've had great luck with Subarus as well. I've considered an XT6 or SVX on several occasions...I love the oddball cars. I very nearly bought an EJ22ET Legacy GT once...while they're not very powerful in NA-spec, it'd be fun regardless. My wife drove a nice old Impreza LS automatic for years, perfect match for her. I mainly recall it being terrifically easy to work on. And oh-so-slow. We sold it to my FIL and the little teal beast runs on and on. I'm not even sure how many miles it has...but I'm sure it's over 200K by now. I occasionally ask if she'd like a newer one with more letters on the trunk... 
Thanks Dave. Believe me, I'd like to procrastinate.... and I usually do, haha. I have a DD 05 civic for the commute (83 miles each way), a 66 beetle that I've been re-doing, the 05 LGT wagon that I love and is almost complete once again, the e30, 2 motorcycles, and soon to be 2 sons! Enough to keep any man busy for a lifetime pretty much.
I HAVE actually have a 91 Legacy SS. Have that awesome little car for two years. Ended up going a TMIC conversion since stock they are non-intercooled. Did a 20G turbo setuo on it, as well as many suspension and power upgrades. I loved that car. I've also built a turbo-ed 98 forester that was about 2 inches off the ground (suspension, subframe, and body modifications to do so), turbo-ed/modified imprezas, and a wrx. I've been doing the subaru game for a while, and been able to enjoy a few oddball cars as well. I've always wanted an XT6 or a 4wd loyale!