I drove my E34 pretty hard in corners, being a 525 with a slushbox it wasn't fast so I focused mainly on handling and braking on that car. I went with cryo-treated Cross-drilled AND ventilated rotors. The drilled holes basically help brake pad to rotor surface gases escape where as the slots help with "Bite" and supposedly help in cooling. The cooling theory has always been under debate so I can't verify that part for sure.
I ran ceramic OE style pads I bought from the local parts house and after driving with it for a year, the pads had very little wear, a TON of bite and really confident stopping power. The little roar from the slots didn't take long to get used to, but you can really feel it bite especially in a panic stop. As some have stated here, you can get all 4 on e-bay for less than buying just the two front OEM rotors.
I definitely plan to get the same setup for my E39 as well.
*** note about your question 3 : after a year, my ceramics had very little wear and very little dusting on the Basketweave rims, however the ceramic pad material is a harder composite, which wears rotors faster. My x-drilled/vented rotors actually had a little "lip" maybe 1/4 of a mm where the pad didn't touch the very outer edge of the rotor. I was told that when running rotors like these, you should really go with organics so the pad takes the majority of the wear instead of the pads eating up your expensive rotors. I'll probably consider "Green-stuff" racing pads next time around just to see how well they work, last and how little they dust. (If I'm not mistaken organics dust the rims the worst)
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