Yes, there's a rubber profile gasket that sits between the top of the timing chain case and the bottom of the cylinder head, it's #10:
http://www.realoem.com/bmw/enUS/show...diagId=11_6003 If that's where the trouble lies, I'll pray for your soul, as that's a bitch to change. I ended up removing the head to get the new gasket in. But, I think there's a way to replace it without removing the head.
It sounds like you've ruled out the water pump, as you're seeing coolant above it?
By the way, where are you at? I'm in Greeley.
Paul
'96ti 246,800 mi.