If you haven't already seen my thread have a look, It should cover most of the general stuff. I would try and find an M40 manual conversion first it will make it much easier, then just find and m42 from an auto.
I used the 318is manifold as I knew it would fit 100% like OEM, I have also heard that that the M44 will fit but I have never seen photos of it installed.
This is the guide I used for COP http://bmwz3diys.weebly.com/coil-on-plug-conversion.html, I may also have a spare COP bracket for cheap.
Your stock diff will work but RPMs will be higher, the ratio you need will depend on the gearbox you go with, a 4.1 is good with a E30 m40 gearbox. AFM to MAF is not going to happen unless you go aftermarket ECU. Most M40 flywheels are already single mass and will install without modification.
I would look for a crashed car from turners or manheim. Even running a driving 318ti's are worth bugger all.