I just finished the install. An e36 6 cylinder radiator WILL fit in a 318is but with more modification than I had originally thought. I still, however, believe this is a worthwhile modification. I have a completely irrational hatred for the stock m42 radiator/expansion tank design. This hatred led me to this radiator swap. Here is what I have found...
1. The driver's side lower radiator bracket is too long and will not allow the e36 radiator to drop in. The solution is getting the corresponding bracket from a LATER e30 325 from the junkyard. *You can also remove the plastic airflow block off that is in front of the stock M42 expansion tank assembly, since there will now be radiator area for air to actually flow through.
Here's the original bracket:

M42 bracket/Later E30 M20 bracket Side by side:


New bracket installed:

2. The stock M42 upper radiator hose will NOT fit. Even if you were to install an extension pipe by cutting the radiator hose in half, the stock hose will still interfere with the stock airbox.

The solution I came up with was using a NAPA hose #7315 and trimming it to fit. It seemed to fit the bill perfectly.

3. If you are using the stock clutch fan, you will need to get creative and find a way to both seal the driver's side of the shroud to the radiator AND secure it to the radiator. I stuck a length of silicone window seal from home depot to an aluminium L-bracket and riveted it to the side of the shroud.

4. Lastly, you need an expansion tank from a later E30 325 and modify the block-expansion tank hose to reach the new expansion tank location. I was able to do it with a 5/8" 90 degree hose fitting. (This is not visible in the picture.)

The new set-up appears to be working as it should. The real test will be when I go back to LA and sit in traffic. I'll let you know if anything changes. I would like to go to an electric fan, but if the stock fan continues to do its job, I doubt I'll switch.