what about temperature sensors, are they working? they are pretty cheap to buy. Is water pump ok?
is fan working? it should work all the time when engine is working + it runs faster when engine is too hot(you can hear it working louder). It can be disfunctional fan pulley
http://www.realoem.com/bmw/showparts...44&hg=11&fg=35 try to get another used one to try or you need to buy a new one.
From the discussion on our local bmw forum it can be fan which need to be replaced or water pump but you need to try it yourself
Take it to some smaller bmw garage where people know e36 not original bmw service they are killer expensive. also ask local guys on your local bmw(e36) forums.
I hope you dont fill the water back when the engine is still hot(I saw people do that :shock

or the head will crack 8)
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