Failing Rear Diff...
 

I have a 92' 318is with an OBDI S52 swapped in it along with the ZF trans,

The Rear Diff in my car I think is overheating, It's melted 2 speed sensors and the seal on the Drive shaft flange has gone out. It doesn't seem to be low on oil and I keep it topped it off but but it still seems to get entirely too hot. Could this have anything to do with it being a 318is rear and can't handle the S52? Could the extra power cause the bearings to go bad and make it over heat? What do you guys think?

Should I upgrade to a 325i+ Rear end or rebuild what I have?

What are the differences between the 318 rears and the 6cyl model rears other then the ratios? Are they weaker?