Ah, well I'm pretty sure that's what the first mechanic did. However, I'm also pretty sure he did it with the air conditioner on full blast, not the heater.
Anyways, I had another mechanic come by and check it out (one who is way more experienced with BMW) and he tells me that he thinks the gasket is blown and possibly the head itself. He's going to come by tomorrow to do some type of pressure test to see if water comes out the spark plugs? He says on my engine type it's usually the third head that goes out and that is what he's going to test to see if the head is damaged.
So, I guess now I need to just get the water pump, head gaskets and possibly one of the heads replaced. Does anyone have suggestions on where to find a head?