JasonM3,
Like a lot of other people, a 325 is a better platform to start an engine swap project. As far as nomenclature is concerned "m" designation on motors is for regular production models (m20,m50,m52, etc), "s" is the designation for motorsport engines (s14, s50, s52 etc.).
The M50 motor was introduced into the 3 series on the 92 end concluded in 95 with the introduction of all of the new DOT's smog requirements and the ever wonderful OBDII (sarcasm). I'm not 100% positive, but I believe the m50 was first introduced in the e34 525i as a replacement for the m20 powered model.
1985 318is doesn't exist. the 318is was introduced until the 1990 model year. The major features were a 4.10 LSD, sport seats, mtech I steering wheel, and a few other goodies like the m42 twin cam engine later used in the e36 318i/is/ti. Also, shock sizes are different (45mm OD vs. 51mm), etc.