With the AC working nicely, I put about 200 miles on the 318ti the other day just to see how it would do, and for the most part it did great! I also found that the M42 revs to about 6800 before hitting a limiter, neat.
Upon parking the car at my shop for a few hours I discovered some puddles underneath the diff and transmission. Looking underneath the car, I discovered the diff was leaking pretty badly:
In about 15 minutes I had the diff out, and found the side seals to be completely destroyed, probably from me shoving output flanges into a diff that had been sitting for 10 years. Easy fix though.
With the side seals replaced, I took it as an opportunity to easily service the fluid, so I drained out the minuscule amount of fluid that was still in the diff and replaced it with some Liqui-Moly 75W90 that I had laying around at the shop.
Moving onto the transmission, I found a similar mess:
With the diff out, it was trivial to just unbolt the driveshaft and move it out of the way so I could access the leaky output seal and leaky selector rod seal.
New seals went in without much drama, and I cleaned things up a bit.
Of course I couldn't resist replacing all the shifter bushings while I was there, so it got those too. All the bits were pretty inexpensive and readily available so why not?
Everything went back together nicely, and I was left with a diff and transmission that didn't leak anything. The transmission also got its fluid changed out, since it was low from leaking it out. It was about 3 hours of work for all of this stuff, not too bad.