What dif do i have and will an m3 diff work
 

I have a 87 325is. I cant read the dif tag, it is rusted to hell. Below the tag in the casting is 1210 433. THere is a big yellow s under the dif. Can i upgrade to a 4.10 m3 diff and will that give a performance increase. Thanks

3.73 is what you have

The 4.10 is a bolt in swap, no mods required.

You will get better acceleration, but tach higher at freeway speed. I.e. 75MPH at 3500 RPM with the one in there, 75 at 4000 or more with the 4.10 something like that..

Basically you get acceleration but lose top end...

is the 4.10 usually more desireable, will my speedo read properly? Which way to most people go, if they have the choice?

The reason most perform a differential swap is to replace a failed diff or to upgrade to an Limited Slip Differential.

4.10 LSDs are the most sought after and tend to be desirable for e30s.
Last march, I paid a little over $700 for one off of eBay that had been inspected and cleaned up. I believe with some patience and better thought, one could spend much less.

Your speedometer will read correctly regardless of ratio.

Jared is spot on by saying that you will gain acceleration but lose top end.

can’t imagine a change from the 3.73 to the 4.10 making an overall, worthwhile difference. Yes, it would make a difference but since you already have a LSD (as determined by the yellow ‘S’), I would advocate putting performance upgrade money toward a chip, exhaust, and suspension tuning while saving on fuel mileage gained from the 3.73 diff. .. that’s jmho