You should stay with the stock air filter.
The air box can take a little modification however. There is a horn in the bottom that silences the air in the box. It can be removed and I believe about a 4" inside diameter tube will fit on the short plastic flange that remains to direct air from behind the headlight (as in stock but about 2x bigger). You might feel a little more umph in the seat of the pants dyno and it makes for a little bit of throttle noise kind of like a 4-barrel carb kicking in. I'm using a left over Dinan tube on mine but you can make one that is just as good or better with a couple bux worth of Home Depot tubing.
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