Bob mentioned pretty much what happens when you've got too much oil in the block. It usually takes over 25% too much oil in the sump for the oil to get foamy like Bob mentioned.
As the M60B40 takes 8 quarts a 25% overfill would be 10 quarts or 9.46 liters.
But BMW engines are built to tighter tolerances so I don't know if the general 25% overfill rule would still apply to an M60.
If you did get your oil foamed up due to an overfill it could possibly lead to an overheating condition if the oil got foamed up so bad that it no longer properly lubricated the engine. You'd need to run it pretty hard like that to overheat it.
Don't think the overfill is related to the coolant/smoke issue. Not saying it's not possible for them to be related. Hope the shop (different shop?) finds that your headgasket is fine.
Cosmos Black/Black 1995 540iA M-Sport
BMW Individual Exclusive Edition, 1 of 65 total, 9/25/95 Build