First of all, a 535 with a manual trans is probably more car than you think. Unless you are gutting this thing for a track car, I recommend you lose the idea of dumping the cats. Do you imagine you will get more power without the cats? I doubt you can and for sure I doubt you will be able to manage the engine without the 02 sensor and the cats etc.
The clone/generic chips on ebay are just what you think. Junk. Spend the $200 and get an EAT chip.
The fact that your fan blower is making noise makes me suspect that there may be other issues with the car. I highly recommend you take a systems approach to this car. First, is the braking system completely up to snuff. Can't go fast if you can't stop. What about the suspension system? Are the shocks, sway bar links, upper and lower control arms, etc, etc, etc up to snuff? Cooling system. Radiator, fan clutch, hoses, belts etc?
Step back from the go fast and make what you have perfect. You can improve the handling and be able to better use the horsepower you have. Think of about 4 or 5 modifications that you want to do. After you are sure the systems of the car are in good shape. 1) EAT Chip, $200; 2) Sway Bars M5 front and rear for about $300 shipped from BMA; 3) Suspension springs and shocks, $700 - $1000 4) 16", 17" tires and wheels, $1000 up.....you get my meaning?
By the time you have your car sorted out, have learned to do some maintenance and get it right, you will be less tempted to take a sawsall to it in an effort to get more horsepower.
Finally, the nut behind the wheel. Ever been to a BMW driving school? Driven enough autocrosses to shed the "Novice" moniker? You don't learn to drive fast on the street. You learn it at the track and from those who have gone before you. And your car has to pass inspection before it ever turns a tire.
Just my .02 worth.
Mike Holbrook
Meridian, Idaho
1992 535im, 17", Euro M5 Throwing Stars 8's & 9's, FK-451 235/45s & 255/40s, M5 Sway Bars 25/20, Conforti chip, Lowes Ram Air, glass sunroof