My solution:
The first thing to do is use your TDC lock pin before you remove the M42 flywheel and make a mark for TDC on the vibration damper and crank case (or wherever works best for you). This small step will save a lot of headache in the future.
After you remove the M42 flywheel, remove the "spacer ring" from the flywheel using a drill to remove the spot welds. The spacer is on the clutch facing side.
I have heard that some flywheels may not come with this piece, but the one from the M20 is the same thickness. You will have to grind out the center bore though so it can fit on the crankshaft.
One thing to note is that I had to enlarge one of the holes so that it would fit over the flywheel locating pin. As you will notice, the spacer has a large center bore so it is fairly difficult to get the bolts in place properly. Since neither the part from the M42 or the M20 really work so well, I'm thinking about making up some of my own spacers that would be a direct bolt in piece and of the proper thickness (the spacers are about 1mm too thick).
Bolt the flywheel on using stock M20 325i flywheel bolts which are 25mm long. Do NOT use the M20 pacer ring on the front like the factory flywheel had. To install this piece you will need bolts that are 3mm longer. If anyone knows of a bolt approximately 30mm long please let me know.
This part is one that most people find confusing. The M20 starter seemed to have enough room to bolt in physically, but the engagement depth of the bendix gear was different than the M42 starter. Also, I really liked having the threaded casting on the M42 starter and its much smaller/lighter...so I just went with that.
The first thing you need to do is split the case:
Remove the bendix gear section from the starter. If you remove the solenoid you can easily pull out the yoke, but you don't have to. My bolts were all funked up and I could not remove them with an impact hammer so I just spread the yoke and pulled the full bendix assembly out.
The assembly I refer to looks like this, the bendix section is the part with the spring, retainer and actual gear that slides up and down on the shaft:
Other guides will tell you just to switch the M20 section with the M42 section. From my measuring this is incorrect. The M20 section is much taller and the bendix gear will not fully retract into the starter housing. i decided to split the large retainer ring with a grinding wheel to remove the actual bendix gear itself and switch them. I then welded the casing back up and ground it flush.
You can see what I did here:
To remove the bendix gear assembly from the shaft you need to push down (toward the gear) on the ring toward the end. Inside that is a circlip and once that is removed you can separate the gear assembly from the shaft.
Everything should line up nicely now! A nice cheap and easy upgrade!
