I just installed Xenon lights in my 88 535i
Here's a short summary on how I did it:

tools needed:
-philips screwdriver (the one from the BMW tool kit is perfect)
-drill 10 mm or similar size (I used a smaller one, but 10 mm would be easier)
-Dremel or similar tool
-hot glue tool
-wire connnection hardware
-insulating tape
-3-4h of time
-a bottle of german or swiss beer ;-)

1. buy 2 D2S and D2R (Xenon bulb and high voltage DC-DC converter. I got my kit from EBAY fo around 250$.

2. take off the reflector of your low beams (3 screws)

3 take off the cover, H1 bulb and clamp of the reflector

4. enlarge the hole, where the H1 bulb was with the drill.

5. brake off the bolts around the hole.

6. remove as much plastic of the xenon bulb with the dremel.
plastic socket, until it fits

7. fasten the bulb in the reflector socket with hot glue

8. reinstall the reflector and connect the hogh voltage converter to the xenon bulb and the low beam power cable.

9. replace fuses 2/10/11 with 10 A fuses

10. turn on your motor and then the lights

11. drink a bottle of beer;-)

mill
88 535i, diamond black- tan leather, 5-gear, 234000km, fully loaded