If it's not rusty and runs well, go for it! But look everywhere for the tinworm, as well as stress cracks in the front subframe and any damage to the shock towers on the front and rear wheel wells. Seriously... look EVERYWHERE. If there's any rust, move on. If it's a roundie that's a bonus... if it WERE a tii expect 50% or higher asking. Frankly, a well set-up M10 with Webers, 292 cam and header will outperform the injected car, with less fuss.
The S14 swap was the original late '80s hot setup, now almost common but a great way to go if you have the scratch. A guy in Georgia did an amazing M30 swap
that us CCA guys marveled at 25 years ago. It went like the Hammers of Hell in a straight line, but oinked it's way around corners. I've seen a couple with the M42 which is tidy and a fraction of the cost of the M3 S14, but honestly, the original M10 is easy to tune and robust. Swap in a later 5-spd only for cruising, the 4-spd is good as it is. The LSD from a 320iS is a good add, too... and coil-over kits from Eibach are reasonable.
Post some photos if you can... condition #3 or better, expect to pay $3,500-7,000 or more in the current market. Good luck!
BMW 2002 Registry - Homepage of The New BMW 2002 Registry