Hi Bill,
Nikasil problems affect certain BMW V8 and 6-cyl engines on certain models at certain build dates.
When BMW made these engines, they made them of Alumimium which is a light metal and keeps the engine weight down.
However, Aluminium is a relatively soft metal compared to engines with steel bores, so BMW had to put a coating of hard metal on the cylinder bore surfaces to stop the hard piston rings from rapidly wearing out the engine.
BMW electroplated a hard coating of Nickel metal onto the bores of their engines.
Unfortunately, in the UK and USA, we had high-sulphur fuels, which produce certain acids during combustion. These acids got behind the Nickel coating and corroded it, usually at the very top of the bore where the acids could get behind the Nickel coating.
The result was green patches of Nickel Sulphate around the top of the bore, which is a rough salt that won't seal the bores when the piston rises on the compression stroke.
Symptoms include rough running, high oil and fuel consumption, lack of power, poor idle, and difficult starting in cold weather.
BMW initially replaced faulty engines under warranty with new Nikasil blocks, until they found the cause and came up with a solution.
The engine design was changed on the V8's to Alusil blocks, where the bore surfaces are made from high silicon content Aluminium which is very hard-wearing. As this method is via impregnation, there was no coating as such on Alusil blocks to strip off, so the problem was solved.
Six cylinder engines were replaced with steel-linered engines. BMW didn't exactly broadcast the issue for obvious commercial reasons.
Cars affected were all E34 5-series & E32 7-series V8's built between 1992-1995, all E36 3-series, E39 5-series and E38 7-series built between 1995-1998, and also early 4 litre 840i's. 328i's, 528i's & 728i's were particularly prone to the problem.
Early 840i's with the M60 4 litre V8 are also afflicted. The 750i & 850i V12's were NOT affected, as these used Alusil Blocks. No diesel or 4-cyl engines were affected at any time.
In 1996 BMW brought out the Alusil V8 in the E39 5-series and E38 7-series, so the 3.5 & 4.4 litre V8's in these models were ok, as well as the later 4.4 litre 840i.
In 1998 BMW brought out the steel-linered six-cylinder blocks to cure the problem on the 6-cyl engines.
Replacement Nikasil blocks were still being fitted to many cars, and on the V8's, replacement Alusil blocks were only fitted after March 1997.
On the six-cylinder, steel-linered blocks were only fitted as replacements after March 1998.
You need to check the service history of any of these models very carefully, and check the engine condition.
Not all cars were affected, only those run on high-sulphur fuels. It's quite a complex issue to get your head round, but if your prospective purchase runs like a bag of nails and has an original Nikasil engine, run away very quickly!
BMW won't pay anything towards repairs now as the affected cars are so old now and out of warranty.
Also, there are no quick fixes either-if the engine block is faulty then it's scrap-full stop. Replacements cost thousands.
Towards the late 1990's low sulphur fuels were phased in so the problem reduced considerably. Jaguar and Audi were also affected with their V8's, although not as much as BMW as BMW brought their Nikasil engines out when high sulphur fuel was still common.
Hope this helps!
Alex
Nikasil problems please enlighten me
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thanks for that info
thank you all you good people...--EDITED-- 
Although I have owned many cars some of them fast ones, I have never had such a finely engineered car as this (even at nearly 10 years old). I certainly don't think I shall ever own another make from now on.