As you can see, the consensus is that this is a feasible approach. Suspension and bushings should be the first upgrade and as Ranger says, talk to Bimmerworld. I’d say that the first round would be;
Control arms & maybe tie rods
Springs, shocks, & sways
Camber plates
Control arm, trailing arm & subframe bushings
Motor, transmission, & differential mounts
Shifter bushings
Bimmerworld can supply all of that and it will be of good quality. A short shift kit would be nice, but fresh bushings in the stock shifter will help lots.
Since you have to pass emissions and will be driving this on the street, retain a stock exhaust and cats for now.
I assume the car has wheels, so I’d say to move seats and harnesses up above wheels. If this is a coupe you can give up the back seat and install a harness bar until time for a cage. A halo seat is preferable for a race car, but would be rather a bother when driving on the street. As previously mentioned, expired seats would be a start.