I have a 97 540 myself and have done a number of upgrades.
Wheels - I highly reccomend AAArims.com who make great replica wheels for BMW. under $1000 isnt really possible if you add tires.
The tail lights are fairly easy to replace. All you have to do is a little bit of drilling with a rotary drill.
The headlights are also very easy to change out, your best bet would be to go with halogen "angel-eyes."
For both headlights and tail lights I bought them from a guy "Pavrac" from ebay. They are both authentic "Hella" products (OEM for BMW) I reccomend him.
Here is a link to what upgrades I've done http://www.bmw-forums.com/forum/inde...howtopic=31608
Good luck, and keep us in the loop!