When I first bought my 1991 325i I knew that, being a very early E36 model, it had different front suspension than the later models, and because I thought this must be inferior to the later models I intended to change to the later type.
As I understand it, the differences are that the sway bar mounts to the struts rather than the control arms, and there is differences in the struts themselves including everything up to the top mounts.
After a little research it seems that these early models may not actually be inferior. Apparently mounting the sway bar near the top of the struts is more effective (due to more mechanical leverage), but according to some research I have found
, this may have made the car more hard edged and subsequently uncomfortable so BMW made the change.
It seems that the different spring and top mounts were also superior, and possibly changed to reduce costs. According to this forum post
, 320i and 325i cars had an expensive all in one steel/alloy top mount with a built in roller bearing, similar to the E32 7 series.
One reason to replace the sway bar and strut setup to the later type is that parts availability is better. Although I understand that the 3.0 litre M3 (European or US, I'm not sure) has the same setup so perhaps there is some interchangeability there.
One potential problem with changing to the later parts is that I read in that same previously mentioned forum post
that the sway bar mounting brackets are in different locations, and although it may still work okay, it may put too much strain on the sway bar links and they will need replacement often.
The following images show the difference between the 46 mm and 69 mm long spigots on the early and late model front struts. The final image shows what happens if you try and put a late model strut into an early model top mount.
The following diagram from realoem.com
shows the early model sway bar mounting (up to October 1991) shown in red, and the later models shown in yellow.
More research is required...