JoshIII remembers:
Does your 528 use hydraulic fluid pump
to assist with power steering *and*
power brakes?

My old 1980's vintage 320i uses pneumatic power
brake assist taken from the intake manifold.

I am familiar with a case involving
my cousin's 1990's vintage Bronco II
of a defective pollution control
valve (PCV) or other check
valve that somehow allowed
oil or power steering fluid to get
injected into the intake manifold...

I'm doing this from memory, but it
seems like I remember the fluid involved was
from the power steering/braking system?

Apparently the braking system on that
vehicle relied on some combination of manifold
pressure (vacuum) and pressurized
fluid to actuate the brakes.  Failure
of some valve allowed fluid
to get mixed with intake air in his
engine.

The Bronco II  had German made
fuel injected Ford engines in them.

I remember when it happened, but
I don't remember all the the details.
I just remember he said plumes of
white smoke started billowing
out his exhaust.  When it happened,
he thought he had a blown an engine.

My cousin is a Ford mechanic.  I
should ask him about the experience
again.  He made the simple repair
of the valve himself.

JoshIII
upstate south carolina

That does sound unpleasant..

Besides the engine, you're likely to need all the O2 sensors and the
catalytic converters if the oil actually was running from the exhaust.

It sounds as if you have a cracked head..

Not a good thing.

If it was me - I'd consider doing one of two things:

1. Find my own junkyard engine. The engines on these cars aren't
terribly troublesome so there should be some fine examples kicking
around in various junkyards. This is where Google, or membership in the
BMW-CCA would be useful. You want BMW specific junkyards like Vines
Automotive..   Get the same engine you have if you want the simplest
swap out..

2. Find an E36/M3 S52 engine. Direct drop-in, and MUCH more powerful
than the engine you have (240HP vs around 190HP) - it's plug and play
compatible.. but you might (not even sure if this is necessary) have to
get your engine ECU "flashed" to a ROM version for this engine. There
are various performance upgrade places that have software updates to do
this sort of thing.

#2 is gonna cost more - the S52 engines do go for some $$$ - but not any
more than either of the options you've listed. #1 should be considerably
less expensive than the quotes you got.

You might also check around (Yellow Pages) to see if there are shops in
your area that specialize in doing engine swaps...  there are shops like
this and they are usually less expensive and faster than using your
friendly local independent mechanic.

FWIW - a BMW rebuilt S54 engine (344HP) as used in the E46/M3 and the
Z4/M-Coupe is only about $6,500 with a good "core"..  the prices your
friendly mechanic is giving you seem awfully high.

Colour of smoke

White - water - wet fuel of water in head (gaskets or cracks)
Blue - oil - oil leak in head - gasket, crasks or worn / broken rings
Black - fuel - far too rich

How long have you had the car?  What sort of servicing?

It was me.  I now have a straight-8!  Cool...