3. Yes, your '95 M50 only needs 89 octane (midgrade) in stock form. Just don't put 87 in it. If you only can choose between regular (87) & super (91-93) I'd be putting super in it. Or you can mix regular & super to get midgrade. That's all that's done at the refinery to get midgrade since they only refine 2 different octanes, regular & super.
4. Take a wire brush to the rust and see if it's just surface rust. If it is just surface rust then sure, brush all of the loose crap off and coat it with a rust neutralizer.
Cosmos Black/Black 1995 540iA M-Sport
BMW Individual Exclusive Edition, 1 of 65 total, 9/25/95 Build