Considering an 84 325e

[msservices]

Is that the oring that is red and popped out, or is that gasket sealer?

[DanZ3]

That’s the o-ring. The seal was also bad. The spring was partially out of the seal. All replaced with another brand new timing belt. No more leaks.

[jamespaleo]

FYI, we had one of those years ago. We found the diff (and I don't remember the ratio now) was so geared towards fuel economy, it actually made the engine work too hard. We swapped the next shorter diff in and it actually got better mpg. Course that does lower your top speed since the rpms will top out at a lower speed, so depends how you intend to drive it.

[DanZ3]

I have a 3.07 Torsen LSD from a 3.0 Z3 that I will be installing. @ 75 adds about 200rpm. Should be good.

[superj]

Yup, that should be good, or a 3.23