RD Sport (the "real" Racing Dynamics, located in Orange County California) had an overstock of brand new headers for the E34 M20 525i sometime in 2002. These are high-quality, 100% stainless steel and have equal length runners, which is a rarity for these cars. RD sold em at the bargain-basement price of $350, which was a huge drop from the $1,000+ that they wanted many years ago during the M20's heyday.
Since the early 525i (1989, 1990) uses the same M20 engine that the E30 325i has, many E30 owners bought a set for their cars believing that they are fully compatible. Turns out that they aren't for one big reason: The E34 engine compartment is much larger than the E30's so there is more clearance from the engine to the firewall on the 525i than on the 325i. The RD headers that were designed for the 525i's larger engine bay are bent at a wide angle, as seen here:
That's great for E34 owners, but not so great for us E30 guys. The headers need to bend sharply to clear the firewall and have to look like this:
(The picture above is the RD E30 headers, but they've been out of production for at least 8 years now.) Now, because of the difference in bends a lot of crestfallen E30 owners promptly put their E34 headers for sale on eBay believing that they won't fit. However, if you find a muffler guy who's good at hacking things up you can get em to work but be warned, it's a fairly labor intensive (read: pricy) job.
No, I didn't install it myself, and neither should you. What you'll have to do is find a muffler shop that does peformance work and/or custom jobs since they should have the experience to do this kind of stuff. If you're thinking about asking the guys over at Midas, forget it. I found Chris Walker over at Bay Muffler in Mountain View, California to do the job for me.
The biggest problem is obviously getting the rear header (#4-#6 cylinders) to clear the firewall since the pipes literally run right into em. Because the headers are very well constructed, it is nearly impossible to bend the pipes (especially at the point where it merges from 3 pipes into 1, which is one of the critical areas that have to be bent). What Chris ended up doing was chopping off the part of the header that bent towards the firewall and rewelding the lower section of the pipe together so they essentially point downward. From there, he was able to make the necessary bends in order to give it at least 1" clearance from the firewall (the minimum "safe" distance). The metal heatshield that mounts from the driveshaft tunnel upwards against the firewall was also slightly modified by simply banging with a hammer to give more clearance.
The forward header (#1-#3 cylinders) was easier to mount, but again there was a major problem: It fit against the cylinder head without much problem, but there was now no room to spin off the oil filter. My 2.8i engine uses the 325e block (without the bulky oil filter housing that the 325i's come with because of their oil cooler) and it still  had no clearance. Unbelievable! It made me wonder how they're supposed to fit the 525i, which like the 325e, has no oil cooler. Chris relayed several options back to me, including using a shorter oil filter from a 318i/M3 or installing a remote oil filter kit and have the filter mounted elsewhere inside the engine bay. Neither option sat very well with me, especially considering that even with the remote kit there was still the possibility that the oil lines would run into the forward header (more specifically, the #3 pipe). Because of my reluctance, Chris ended up bending the #3 pipe just enough to allow the filter to spin off, but that caused one of the A/C lines to come dangerously close to the header. A longer line would solve the trick, but zip-tying it would also work (at least temporarily). My A/C doesn't work so I didn't really care.
The "finished" headers may look a little messy, but it works:
Because I was concerned about the amount of heat that would be emitted from the headers, I decided to have them thermal coated. I chose HPC in Utah. They are supposed to reduce underhood temperatures by as much as 40% in some areas, plus they provide rust protection and look great. Once Chris had the headers fit properly, he gave em back to me and I shipped it out to them. I chose their polished aluminum HiPerCoat finish, which ran me about $175 excluding shipping. Turnaround time was about 14 days. Here's how they looked when I got em back:
Upon reinstallation, Chris found out that the exhaust manifold studs that attach to the cylinder head near #6 would rub the piping, so he chopped a few of them short. Otherwise, they fit without any problems at all. He welded the headers onto a set of custom downpipes, where he attached the oxygen sensor. (Don't use any of the O2 ports located on top of the headers since that will give an inaccurate reading of the exhaust gases.) Since the pipes I used are completely independent and have no X-pipe, he plugged the sensor into the #1-#3 downpipe. (I tested the readings later with a diagnostic scanner and they were fine.) I routed the O2 sensor wiring behind the metal firewall plate for protection from the heat, then zip-tyed the top of the wiring to the chassis so it wouldn't dangle around.
The installed headers looked awesome and I was quite pleased with the results. There's a more "gutteral" sound coming from the engine, and because I also had a quieter muffler installed (I ditched my Supersprint and had Chris custom install an E36 M3 muffler), the header noise is more apparant. It's not loud by any means, but definitely sounds more aggressive than stock. I like it since I like to hear engine noise as opposed to exhaust drone. Powerwise, there seems to be much more pull after 2500 RPM or so with much more noticeable power at the upper RPM range. Previously, the powerband seemed to suddenly drop off after 5500 RPM or so (this could also be contributed to a bad cat, which I also replaced) but now it pulls strongly all the way to redline. Here are the finished pics (coil wire and expansion tank moved for the pictures):
Depending on how much you get the headers for, the total price for everything will probably run at the very minimum $1,000, much more if you got a bad deal on the headers. Add another $100 for custom downpipes, $200 or so for the thermal coating, and maybe another $275 for a catalytic converter (if you need one) and the bottom line will end up being more than many 325e's these days. Now that you know how much time, money, and effort was required, don't be fooled by sellers on eBay advertising that these headers "fit E30 325i's with only minor modifications necessary."
2189 Old Middlefield Way
Mountain View, California 94043