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Wayne 962 Wayne 962 is offline
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Looks like what I originally guessed - valve cover seal. See the article here:

http://www.pelicanparts.com/bmw/techarticles/E36-valve-cover/E36-Valve-Cover.htm

-Wayne
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Wayne R. Dempsey, Founder, Pelican Parts Inc., and Author of:
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Old 08-06-2006, 04:04 AM
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