As I just have built a track day e21 and have raced for a season I could give some advice on what things to take look first.
Leave original engine as 4 cylinder is always better for handling.
To tune up your m10 you would need these things:
[*] Sporty camshaft. I would go with some 306 degrees or even more sporty depending on what tracks will you be going
[*] Electronic fuel injection
[*] New ECU. Something like MegaSquirt or even VEMS
[*] Custom exhaust header along with specially for your setup built exhaust system. This gives a lot of power increase if correctly built
[*] Higher compresion
Through everything out of car. Lighten as much as you can.
Proper rollcage + spots seat + sports 5/6 point harneses.
Bigger brakes in front. You can use Volvo brake upgrade combained with New Mini brake discs Or you can go some custom way. Just simply keep in mind that larger wheels then 15" is no good. Rear brakes can be upgraded to 323 brakes. Nothing bigger is really necessary.
On suspension use hard poly bushes + coilovers with quite stiff springs. Don't use simple setup: lowered springs and some sporty shock. They are worth only if you use this car as every day car. They are way too soft even if you think that they are not.
Regarding fuel cell. No need for it as you only can lift with it gravity point of car. Simply take off one side (drivers) of original fuel tank. It still contains 30L of fuel which is more then enough for regular track day sessions. And also your car will be better balanced. Also for fuel system use either foam in tank or fuel catchtank, so you don't run out of fuel when cornering.
Limited slip diff is also a very good thing if track contains narrow corners.
And at last but not least you will have to have good luck!
