For those of you who have somehow managed to not come across the infamous Nikasil issue: Search wikipedia.com, they have a good article. In summary, in about 1993-1995, BMW used Nikasil instead of Alusil to line the cylinders in their E34 engines. Although these engines worked great using high-quality gasoline in Europe, Nikasil actually breaks down in the presence of sulfur.
In the U.S., we've had a problem of high amounts of sulfur in our gasoline (companies are required to leave no more than 1000 ppm of sulfur in gas). Thus after 30K, 50K, 100K mi, etc, many unhappy BMW E34 owners were coming back to BMW with engines that had completely lost compression and wouldn't start anymore. BMW issued an extended warranty of 6 years and 100,000 miles (from date of purchase) to all affected BMW owners, whether they bought their car new or used.
It tends to be that the more refined, higher grades of gasoline have less sulfur content. That is why it would be good if your E34 has used premium fuel all its life. Region also has something to do with sulfur-levels... where I live in Chicago, sulfur levels are among the highest in the nation, while in Califeornia, gov't allows no more than 30 ppm. The good news is that by 2006 a new Teir II gov't regulation will require all fuel across the nation to have sulfur levels of no more than 30 ppm (mainly for enviromental reasons).
I just got my 1994 540i (E34) recently and found out about this issue after my purchase
I will probably rough it out, though, and treat my car well in hopes that it will do the same to me
So back to my question: ***Where EXACTLY is the casting number on my engine?? Thank you in advance for your help!