This idea was first suggested in a post from Jim Conforti to the E36 M3 digest as a simple way to allow for more airflow to the front of the motor on an E36 M3. This is Jim's original post:
It's lot simpler than that..
(Tools needed: dykes, pliers, Phillips screwdriver)
Step 1: Open Hood.
Step 2: Remove front cover from nose of car (in front of radiator) by removing a few screws and 2 plastic fasteners.
Step 3: Look at the radiator shroud which is somewhat exposed now..
Look at the upper drivers side. There is a plastic FLAP covering (read: restricting) the intake for the air box.
It is held on my a large plastic bit up top and a smaller one down the bottom. Use dykes and snip, bend, break... done ;)
Now, look at what you did and pretend you are an air molecule.. you come in the drivers kidney grille.. hit the shroud of the radiator and get fed right into the air box intake ...
FYI, that plastic is part of the "water ingestion" protection so don't run thru any streams with your modded car.
Use a cone filter properly shielded and you get a nice fresh air supply from that "hole" you just made.
It sounded like a great idea, so Jim Powell decided to give it a try and offered to send in some pictures and comments as to how the procedure went.. The following is Jim's report:
There are 5 pictures showing parts of this procedure. Note I did this on my '98 M3/4. I have no idea how similar this is to other years or E36 chassis'.
Refer to pic #1. There are 4 Phillips screws to remove, 2 on each side. There are also 2 plastic Phillips screws with inserts to remove. These are removed by unscrewing the black Phillips screw all the way, then threading it back in 2 turns (see pic #2) and using the screw as a pull to remove the insert. At this point you can pry the shroud out. Note it is hooked along the front edge so that it sits flush. You will have to rehook it on reassembly. The cooling duct to the alternator will also have to be levered off to get the shroud off. Its not required to remove the duct from the alternator, it will flex.
This is a good time to clean all the built up grunge off the paintwork under the shroud.
Looking at pic #3 you will see the baffle described by Jim Conforti in previous emails. It is part of the fan shroud and is attached by molded plastic to the fan shroud at the top and bottom. Snip this off close to the fan shroud a 1/4" at a time with side cutters. Note! This plastic is brittle and will fly all over the place as you cut it. See pic #4 for a good idea of the piece you are cutting off. After removal do some final trimming to dress the alteration cleanly with a file. You never know when you might forget you did this and try to snake your hand in there. Pick up all the loose pieces. See pic #5 for final mod.
No.3 & 4
Reassemble top shroud. Remember to hook it to the frame in the front so it will sit flush along the front edge. Attach alternator duct and get the shroud fully seated. Reinstall the 4 Phillips screws to get it seated firmly. Push the plastic inserts back in and tighten the screws to secure. Give it a final inspection to make sure everything is sitting flat and you have all the tools picked up. Close hood slowly the first time just incase. That's it. Go drive. (Jim Powell)
Taken from http://www.bmw-m.net/TechProc/h2oprotection.htm