No, it does not have the M5 stuff, but it does have sport springs and is lower than the standard suspension. The M5 springs would actually raise a 540 if installed. (Exception: the 2003 540 sports had stiffer suspension than previous years and also had the M bumpers and 18 M wheels.)
No engine differences. Mainly trim package differences which changed over the years but include: sport seats, wheels, shadowline trim, M shifter knob, etc.
All e39 6 speed 540's have the sport package. (97's don't have shadowline trim)
You definitely get more chicks with the sport package
Mike S.
1992 535iM black/black
1997 540iM white/gray
Retired: 89 535iA, 85 318i
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