I don't have any good answers about how to re-glue the cloth. When mine started failing I replaced it with another one out of a newer car - I wanted to change the color so that was the easiest way to do it.
Basically, to remove the headliner you'll need to remove one "B" pillar cover, the "C" pillar covers, and the "A" pillar covers. You'll also have to remove the sunvisors, sunvisor lights, maplights, sunroof trim gasket, and the grab handles.
Once all that stuff is out the headliner will basically fall down. It will come out of the car and there's no real way to describe that process other than saying you'll figure it out when you get there. I reclined the seats all the way back and moved it as far back as it would go.
Here's a link to a writeup I did - which also includes a link to another writeup with more info! Hope that helps!
http://www.kcbmwclub.com/forum/viewtopic.php?f=2&t=1220