Well Dom,
The price on that 540 sounds like it is a great deal.
I too came to the crossroads that you are looking at. Our 95 525ia was aging, and not in a good way. The head gasket blew right at 100K, the radiator puked at 120K, the tranny slip became unbearable at 145K and the last straw, the A/C was on its way out.
We began looking for a new vehicle. As this is my wife's daily driver, it was totally up to her what we looked for. Initially, she thought that she would like a wagon. We looked at the Passat Wagon, the Jetta Wagon and the later model E46 325iT. We made an offer on a 325iTa at the local BMW dealer. Well, they tried to screw us on our trade and at first were not going to honor the price on the BMW Certified Pre-owned web search engine. Needless to say we walked away from that one.
We went to an independent dealership owned by a friend and saw a 2001 525ia. It was really nice, not a wagon but the price was great. We test drove it and my wife said that "this feels right". The 525i E39 is slightly decontented but is nice none the less. I like the way it drives, handles, performs. Its performance is similar to the performance of our old 95 525i. It is a little slow out of the gate but is really a screamer on the highway.
The six in the new 5ers is all aluminum. The steering is rack and pinion and they can be found with 17" wheels from the factory. (Ours has the Style 5's):
I have had this car in for its Inspection I (Free maintenance comes with these cars for 3 years or 36,000 miles) and to repair a blown sword resistor in the heater fan. (Some things never change with BMW!)
The 540 is a good deal. The sixes are nice and will command a lower price.