Nice E36, and in my favorite color(hence the user name)
Since you have an E36 sedan and the weight is higher than the E30 coupe most of us here in the USA drive, I would suggest the Euro-spec only S50B30/B32 engine (Euro E36 M3). ITBs,tubular manifold and a 7400 RPM redline on the B32 equals 321HP/257lb ft torque@3250 RPM. You would have basically a M3 Sedan in sheeps clothing. Sleepers are neat.
Wish we had that engine here in the USA....I'd buy a E36 just to put it in. It would be a handful of fun in a E30.
It would upset the weight balance too much for me to swap into my 318is...I'll stick with the 4 pot M42, just a personal preference.
Thanks,
Stan