There are some previous threads on this subject. The general consensus is that they were nice cars with good engines, and probably worth a hard look if you can find one in good shape. There won't be nearly as much parts and technical support as you'd find for a used Mercedes turbodiesel, but you shouldn't have too much trouble keeping it running.
About that same time Ford sold a Lincoln Continental with that same BMW turbodiesel in it. They are also attractive diesel cars if you can find one. And the Ford bits should be a lot easier to keep in repair that BMW bits. But of course it's not a BMW. Gotta have that blue & white propeller!
As for "what to watch out for": The same rules apply as for any other used diesel car. Make sure the rest of the vehicle is in good condition. Try to find out the car's service history. It would be best to buy from an original owner, if possible, and you should shop for owners as much as for cars. A good owner will be knowlegable about turbodiesels and BMWs in general, and will say all the right things about maintainance. Though sometimes you can get a good car from a total mechanical dunce who simply dropped the car off at the BMW dealer every 3 months and handed them a credit card! (That's how my Mercedes' previous owner handled maintainance, much to my delight.)
-mickey
p.s. If you get really serious about it you should take it to a BMW dealer for a thorough checkup. Make sure they do a compression test.
[This message has been edited by mickey (edited September 05, 2000).]