Hello.
I have owned two pre'88 318i's. I have a 1984 and 1985. They are parts cars now, bought them with high miles and drove them as long as a could... I paid like $300 for the last one.
I got way better gas milease then 23 mpg. I would get an average of about 28mpg, I live out in the country so I do highway and city driving. I took the car to canada once, and on the way back with the radiator half plugged up and the heater on high the whole way it got 35 miles the the gallon. However this was not a stock 318i.
I had bigger injectors, venom ones to be exact. I had a pacesetter header and the cat converter removed. I picked out a stupid muffler in summit and thought it would work but when I got it I could see through it. It was loud but had lots of top end power. I had a K&N filter in the factory air box. I did have redline MTL in the tranny and redline 75w-90 in the differential. I bought this car for $300 and started putting the hop-up parts on it.
Check your timing. The fuel injection on this car does not control the timing like other bmw's. Make sure to have good plug wires, cap and rotor.... I used only bosch. Make sure to run fuel injector cleaner every few tanks. Back to timing, I did not set mine with a light since its a royal pain in the a$$. You have to look through a hole on the bell-housing with the timing light and see a line mark on the flywheel... of course wires and coolant lines are in the way. I set my timing by ear. I used 89 octane fuel. I would keep bumping the timing up a couple degrees until it started pinging slightly below 2000 rpm. Its to far advanced if the starter cranks over hard and slow. I know this is a little hot on the timing but those M10's always liked running from 2,000 rpm and up. Anything lower and it was lugging the engine. Its better to rev and engine then lug it.
One last thing, I would adjust the valves in my cars twice a year. My cylinder heads needed rebuilt though, so the valves required frequent adjustment. Now factory spec if I remember right is something like .010 or .2mm? . I read somewhere that the people who use the M10 engine in race cars run there intake valves at .006 cold and .007 on the exhaust. I thought those specs were a little tight so I ran .007 intake and .008 exhaust. Having the valves adjusted to these specs makes the engine run so good and smooth. You might hear some valve tick but all rockers should be about the same. You will hear if you got one to loose.
These are just my humble suggestions. This is what I did with my two 318i's. Some people will probably disagree with some of the things I did but the cars lasted me. Never left me stranded, got good mileage, and were a balst to drive. I now have a 325 with an eta 2.7 and glad I have it... the 6's power is just so nice. I cant wait to build a 3.0 m20 to stuff into the 325.
Later
I still have them both and will eventually build a race car with all the parts. I even got a '78 320i 2.0 liter engine to build up and put into the E30.
