This is the journey I would not take again. Major PITA. Oil separator is a "tricky sucker" like somebody commented. But I hope the pictures of every step of the way will make this diy a little easier for somebody else. I followed these 2 wonderful DIYs that contain everything you need to know:

The one by Lbert - http://www.bimmerfest.com/forums/showthread.php?t=323335&highlight=lbert+oil+separator

And the one by djmcmath - http://forum.e46fanatics.com/showthread.php?t=536123&highlight=

I took more pictures and included my comments making it a separate DIY. Enjoy!