The euro spec motor has 10:1 compression and no emissions. The US spec motor has 8:1 compression and emissions equipment. Removing the cat shouldn't hurt the motor and will give you some extra power, but nowhere near 218hp. I don't know the answer to your 3rd question, but try posting your Q's on the e28 board. Also check out www.M535i.org for detailed info on the car. HTH.