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Toner,

Congrads on your purchase of the 318i, this is one of the most reliable and overlooked of all E30's. This is the same vehicle I fell in love with and sparked my interest in BMW's.
In response to your questions: (1) The 318i was available in 1984, as well as 1985, so either of these 318i years/parts will be interchangable. There are many parts also compatable from 325e,i,es,is e30's which will also interchange. (2) The swapping to a six cyl. (m20) engine can be done, however, you will need to change the transmission( the bell housing on the tranny supplied with the 318i is too small), also, the differential is smaller and should also be changed due to the increased torque created by the larger engine. You would also have to change all of the engine electronics i.e. engine harness, and control units in order to complete this swap over. The front strut diameters are also smaller and would need to be upgraded in order to support the excess weight or else handling problems would occur.
If you want to upgrade the engine, your best bet is to find an older (1977) E21 2.0L engine and swap the blocks, while maintaining the same 318i (m10) engine electrically control systems i.e. intake manifold, injectors, etc. You could also use an older 2002 engine, but make sure if you use the 2002 cyl head, you change the cam shaft (the spines on the tail end of the cam shaft run opposite to the 318i (m10) camshaft splines, this would make your distributor run in reverse, you'll also have to block off the manual fuel pump port in the side of the head.) (3) you can upgrade your rear drums to disc brakes by changing the hubs or the trailing arms. You can use the hubs from a 1986-91 e-30 to complete this, but the amount of work needed to complete this far exceeds the benefits.
If you were to complete all of these modifications, the price would far exceed that of a 1986-1991 e30 325, and the over all performance would still not meet that of these other BMW's. Your best bet is to drive the car, and appreciate what it is. There are no timing belts to worry about, the maintance is half of a 325, and they get much better gas mileage.
Take care of maintaining the car, and this car will always take care of you.
Hope we could help... :)

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