If I was gonna do an engine swap: go big or go home. Why swap in an identical motor? I'm only gonna do an engine swap if I roast mine which I hope I never do, but I'd source an S52 or go and get an actual M3. The S52 cams in the M52 offer nice gains in performance but are difficult to install unless you have a special tool.
I have the Jim Conforti Carbon Fibre Cold Air Intake and I love it. It looks sexy and sounds just as good. It's a little expensive but well worth it. Sounds great at wide open throttle. The intake gives HP but robs a bit of torque but te under drive pulleys restore that torque so they complement each other very well. I still have the stock exhaust and it's quite nice at WOT. Next ill be looking to the M50 manifold swap and an exhaust. I hear the Borla one is really good. I want something that doesn't sound ricey and raspy. A high flow cat will e in order as well. I hear people put magnaflow exhausts on E36's and they sound terrible. With a turbo setup you need new headers, and they can run around $2,000.
I'm not sure what you could bore a 1.8l out to but the 2.0l uses the same M50/52 block so you could bore it out to 2.8l, but the cost involved isn't worth it. It's more cost effective to purchase a M52B28 and mod that.
I'm not the only one here, just traffic has been a little slower then we would like so we are working on improving it. Feel free to drop our name the next time you have a conversation with someone about BMWs.