Bummer, that's a new one as far as M42s go - definitely don't recall seeing that kind of failure. I'll be the one to call M42s reliable, as I ran one for 5-6 seasons and a half-dozen stage rallies, including smashing the oil pan (which did no harm to the engine). I just put another one in my project e30. That said, they're certainly not as "available" in e30 spec as they used to be. However, you may want to double-check the forums. Maybe I'm wrong, but I could have sworn that you can just use an e36 head/block/timing stuff (which is better anyhow) and swap over the e30 IM and stuff on top. To my knowledge the longblocks are the same other than the timing case. In any case, may want to google it and see if I'm right, since e36 M42 should* be easier to find. In the end, the M42 is just as reliable as the M20 and M50 = which is to say, they're all pretty strong but all have a weak point here or there (the M20, it's the rockers). Most e30s dont' DNF from engine failure (well, Downey has had issues with M54, but he's an exception.).....they break suspension stuff or have electrical issues, in my experience. But who knows. I wouldn't be scared of another M42. I've always found them to be pretty bulletproof if the timing stuff is in good condition.
As you've seen in my thread, M50 is not a hard swap per se, but does take a while to round up all the parts needed. M50 is direct bolt-up to your G240 transmission. What you want is an M50 in a 92-93 5-series, so you get the right oil pan. People want like $400 for those pans sold alone (e.g. if you start with an e36 M50). So you REALLY want the 5-series engine to get that. You'll also need to do some wiring (though IIRC it's not too different from the M42 C101), different arms/mounts. Also you'll need to change shift linkage, driveshaft since the transmission moves back wiht an M50.
M20 isn't hard either, but basically you'd want the full drivetrain from an M20 car, and it's drop in (obviously) aside from wiring.
M42 will still be substantially lower cost in the end. M50s with the 5-series pan are hard to find these days too (I've hoarded 3 of those pans for my own use....though Dan Downey has an unused one just sitting at Nonack's garage as of a few weeks ago ;)
All that is to say, you can do any of them, just a matter of how much work you want - drop-in/searching a bit, not drop-in but easier to find/more expensive, etc etc.
--
Side note, the problem with the firewall is interesting, but I guess it's because you have a fuel cell. My rear firewall is totally cut out, but I have a stock tank.
--
Well, at least you got that DNF out of the way, so there's nowhere to go but up!