Both cars are known for overheating. All BMWs are known for having cooling system issues if not well taken care of.
It really depends on what you are planning to do with the car. If you want to get the most power possible out of he engine without using forced induction, I'd go with the 325is. The engine management system is OBDI, and with the use of a chip, etc., you can get plenty of power from it. If you will go stock or are going to do FI, then the 328is is the way to go -- this engine responds very well to turboing. ANd stock, it has slightly more power and a noticeable amount more torque than an 325is.
The 328is was teh replacement for the 325is starting with the 1996 model year. In general, they should be equivalent. My personal recommendation would be the 328is -- larger engine displacement and will tend to be newer.
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