Sounds exactly like the e39/e46 issue with the FSU (final stage resistor pack) failure. I think the e34 has one as well.

#2

http://bmwfans.info/parts/catalog/E34/Sedan/Europe/520i-M50/browse/heater_and_air_conditioning/electric_parts_for_heater/

Do a bit of digging before you buy though.