This has been done many times. Several years ago the best way to get more power out of the S52 was to convert it to OBD1 and tune it.
This article is written about converting an OBD2 S52 (M3) to OBD1, but the same principles would apply in your case. That is an OBD1 engine in OBD2 chassis.
http://forums.bimmerforums.com/forum...what-I-learned