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Bently is the best manual for e30's, but it doesnt include the M42 engine which is what you have. so unless you get both a e30 and a e36 bently manual, then you may be better off with some other publisher.
does the temp gauge reach normal temp while idling at a stand still for a few minutes, or does it actually never go past the 1/4 mark? alot of e30's run with the needle barely out of the blue, but will move to normal temp while idling.
the o2 sensor is a good candidate for causing the check engine light to come on, but it could also be a fault with the airflow sensor, coolant temp sensor
, or something else.