Thinking of discarding worn out TRXs and going to 17 x 8 inch BBS RKs with 18mm spacers to bring them to the correct 20mm offset. was toying with 215 45s for the front and 225 45s 0r 235 40s for the rear, probably Bridgestones SO2. Kid at the Tire Rack seemed to be just a kid and didn't give me much confidence. He said any of the above would work "really well" Anybody else experimented with putting $2000 worth of wheels and tires on a $7,000 car??!! I must be nuts..

If you're nuts you have a lot of company.Many of my clients run 17" wheels on e28's, myself included.This is my 4th e28 535i,and the second set of 17's I've used.
HOWEVER,it seems you are going to use a 38mm offset wheel and spacers.This can work very well.It so happens I use a 38mm offset Breyton Magic 17x8.5" set on my current 535is.(lots of compliments this week at SEBRING).Depending on the width of the wheels you plan to use,and the availability of other offsets along with the e28 ones,you can do very well.
I started with the e38mm's and IN THE REAR,changed it with 15mm spacers to an almost perfect 23mm offset.On e28 rears,23/25mm offset is just about dead center perfect for 8.5" width.
IN THE FRONT,you need a different offset than the rear with larger 17" rims.In this case I went to 13mm(you may want to go to only 18mm,as I drive a bit differently than most folks.
AND,I use the same size tires front/rear,which allows for the rotation that prolongs tire life.I would suggest 235/40/17,245/40/17,or 235/45/17's.I just switched from 235/40's to 235/45's for a better road ride,but for all out handling use one of the 40 series tires.215/45/17's will work,but are a bit small.If you have more questions,or want a good USED set of BMW OEM 17" wheels,give me a buzz.