Since the time I bought my E36 I always had overheating problems. In the mornings when the car is cold I start the car to warm it up and about after one min white smoke would come out from exhaust like steam. When I am not driving just standing the temperature lever would go over normal and than when I start driving in will drop to normal. First I changed thermostat and water pump with metal impellers. Also I changed fan clutch. And also I added a liquid into the radiator that temporarily seals the holes in heat gasket because at that time I thought my head gasket might be blown. For about 4 months my car never overheated, and no more white smoke only when I start the car it would shake a little like one of the sparks don’t work but after 30 sec it stops shaking. Than After 4 months it stated overheating again. Once I left my car running and when I came back I saw that temperature level was on red so turn off the car. I tried to start the car it wouldn’t start. I waited for about 5 – 8 min and than the car started but temperature never went down only up even if I was driving. Since that time, I never drove the car I took it straight to the shop. I decided to change the head gasket. When the guy at the shop took motor apart he told me that the head gasket was fine. Also he said that it been changed recently because it looked new. Also he said that there was water in motor oil.

If the gasket is fine what could have been the problem?
How water got into the oil?
Anyone know what else could be wrong?

This sounds exactly like a blown head gasket or a cracked cylinder head or block. SOmebody is going to have to remove the cylinder head and check to see if it is warped or if the head gasket is blown.

Engine freeze plugs