Let me start w/ this - don't buy this car
It sounds like you really want a manual, so why settle for an automatic? It sounds like your a bit blinded by everything else the car is offering and possibly willing to overlook the fact it's an automatic? There are a lot of used 3 series out there - hold out for the one you want. You don't want to regret the purchase afterward. If you want a moonroof and you find a car you like that doesn't have it, that's one thing, but the tranny choice is critical. Besides, auto's are B-O-R-I-N-G. You want the manual.
I'd also be very leery of the fact he won't let you take it to the mechanic of your choice. I'd just be careful there.....
I don't think buying from private party is that big of a deal. Dealers sell shady cars too. Regardless of where you buy it, your buying a used car, so breakdowns and repairs and inevitable.
BMW repairs are not cheap - an oil change (recommended every 15K miles in the E46) at my local BMW dealer is $70 or so, as best I can remember. Give or take $10. I just had my rear brakes replaced and it was ~$500 (BMW replaces the rotors instead of resurfacing them).
With that said, the driving enjoyment of the car, for me at least, outweighs any repairs or additional costs I've incurred. To wrap this up, I would recommend holding out for the car you want - the best advice I can give you is this....find a car with a manual transmission and the Sport Package. Anything else it may come with is just a bonus.