There are so many causes of engine light on that it's useless to even try to
diagnose it without READING THE F#$%^ CODES.

FloydR

Low fuel; wrong fuel, contaminated fuel, clogged lines..

Faulty ignition, disconnected / broken spark plug leads, oiled plugs.

Machanical failure, broken ring / burnt valve in one cylinder, slipped valve
or ignition timing belts.

ECU fried.

What piece of over enthusiastic driving brought this condition on?

I had a similar problem on my E46 325i.  The problem
was the ignition coils.  They were replaced under warranty.
I had the car towed to the dealer back then, but was told
it was OK to drive (although there would be significant
loss of power).

Of course, that may not be the problem in this case.

Anoop

The possibilities are endless. What you need to do is pull the trouble
codes. This is easy and free at Autozone. If you are in California, you can
visit an Autozone store, where they will put the scan tool on your credit
card and you take the tool home with you. After pulling the codes, you
return the scan tool and Autozone puts a Full Credit for the previous
"purchase" back onto your card, making the tool free to use.

There is a data port along the bottom edge of the dashboard that you plug
the scan tool into. Once the scan tool is connected, set the Igniton Switch
to ON but not START, and the codes that are stored will be displayed. Come
back here with the code list and we should be able to help you determine
what the repairs needed will be.

I like this link for diagnosing the codes ...
http://autorepair.about.com/od/obdcodedatabase/a/OBD_1996_year.htm

Once you pull the codes and jot down the list, you can reset them --  
directions are on the scan tool. After you start the car and it runs poorly
and the Check light comes on again, yuou can repeat pulling the codes, and
this will tell you what the actual problem is. (Codes can be stored from
months ago that are truely transient problems that have nothing to do with
the price of beans today, so the second pull of codes will give a code that
matches one from the first list, this will be the actual problem and all of
the others are likely to be old and of no consequence.)

If you are outside of California, I do not know if Autozone will do the
same -- allow you to leave the store with the scan tool. You can purchase a
scan tool for less than BMW charges for the service to extract the codes
though. And, if the problem is one that you can fix at home, the scan tool
is a good buy, but if the problem requires dealer service (or equivelent),
the education is probably worth the cost of the tool. The scan tool is not
unique to your car, you can use it on any 1996 or later make or model
automobile or light truck.

By your description -- runs rough at idle -- my money is on a bad ignition
coil. Your car uses a separate ignition coil for each spark plug. Along the
top of the motor you will see two round plastic plugs, pop these out with a
small screwdriver -- be careful to not brake them. This allows the entire
top cover of the motor to be lifted out. Under this cover, you will find the
coil packs with the spark plugs immediately below them. The coil packs are
held on with two 10mm nuts, and the spark plugs take the standard 5/8"
(15mm?) Spark Plug socket.

If this is the problem, the cost of the scan tool and a coil pack will be
less than the cost of the service call at the dealership.

If you are new to this sort of thing, I suggest you get a friend that is not
new to it to help guide. Reward the friend with a 6-pack after the job is
done. There are common things -- anti-sieze compound -- that should be done
with installing plugs that one familiar with this sort of thing should
already know, and which if you are not aware of can create problems down the
road. The work is easy if it is what I suspect is true, but if not done
right, you can shoot yourself in the foot.