That is a beautiful car, I have always had a soft spot for this particular genre BMW, the father of the 635CSI. And the rust on it is not that bad at all. Frame and floors look solid.
I would pull the SOHC straight six bimmer motor and drop in at least a"M" engine, straight six, twin cam 24v, 6 individual TBs etc etc...put ultimately I think an RB26 or 2J would be zzzick!
Yasin