Autumn/Winter update, decided to change the cylinder head/gaskets/water pump/cambelt etc.
Sourced a known good cylinder head with almost new cam from smithy318i (thanks for answering loads of stupid questions) complete with gaskets.
We set about refurbing a set of hydraulic tappets, squeezing each one in a vice to get the old crappy oil out and get them moving again. After doing this, they were left upright submerged in oil.

Re-assembled the replacement head, popped the followers back in, got the cam journals all greased up.
Then it was time for the old head to be removed, take a tip and mark the old cabling, this will save loads of hassle later!
We kind of peeled back the manifolds, leaving them in place and trying not to disturb anything that didn't need to be. Felt that this was the best approach. Anyway, the head came off really easily leaving us with this.
The water pump was a real git, i found taking the head off and pushing it and working it from through the hole beneath the thermostat housing worked well. It came out easily after that. New water pump was fitted and the new head eventually went on. New head bolts were used and torqued up carefully in stages to let it settle. Next was the cambelt and the pulley, this tightened up with no problems. The cambelt was tensioned using Brianmoore's and daimlerman's advice, an allen key and spring balance.

We were pretty much done, reassembling the manifolds. Attaching the exhaust was a nightmare, lying underneath the car trying to keep the gasket on and get the nuts on!
The rocker cover was cleaned up nicely and looked lovely when all back together.

Gotta say, it would not start for love or money. After cranking it for hours, towing it, stripping it apart again and generally scratching our heads for days, i photographed the cabling on another 316i M40 and my suspicions were confirmed. The cable out from the fuel rail went down to the harness, i had it going up to the throttle body.
After sorting this, it fired up first turn. Smelled pretty bad because of all the grease used, but pleasingly it was clearly quieter than before. So, really pleased and well worth the effort.
Before attempting this stage, the car went through the MOT with no drama.
Need a drivers seat (light grey please!)
Front suspension next! Thanks to all who helped me especially the old man! (Dad, not Brianmoore!)
Jon