I had a '95 318ti that I developed for about three years for autocrossing - same engine, e30 style suspension, etc.
With the allowed bolt-ons, a chip so aggressive I had to run 100 octane gas, and lightened to the limits, it weighed 2625 and put down an unexciting 125rwhp on Edge's dyno, most of the torque over 4500 rpm. The ti in many ways is better than the '91 318is being lighter (or at least very close), the engine is even better positioned and it has an electric engine fan. I did do some research on the header situation as well, and the two people I'd talked to that had built headers for the M42 hadn't found much power at all in it. As well, the DISA multi-length intake on the ti is supposed to give better torque down low, but overall, the engine is a very tough reliable economy engine, not designed to put out a lot of power. In its perhaps 90% build level trim (on 245/45x16 Victoracers), I could win locally on occasion in the days before the serious I6 BMWs showed up and when our local national-level Capri was around, I'd consider it a good day when I could get within 2 seconds of his times. There was / is also a local FSP 2002 that I believe has trophied at Nationals that I'd usually just barely beat.
So, I'm not saying don't do it - I love the 91 318is too (my daily driver as well) but it's a heck of an uphill battle. Maybe they'll move the DSP I6 BMWs to somewher...uh heh..oh...oops. :)