Little e36 help needed.

[318is-joe]

its nothing to do with rear axle .it should be something with exhaust mounts , damaged or incorrect fitted .maybe some exhaust part was damaged and after refitted -welded and wrong angle got ,so now sits in incorrect height and angle .maybe some part is not from that set .afaik some pre and post facelift exhaust lenghts are different ,but will look same from first wiev

This is along the lines of what I'd be looking at, certainly not taking the back axle out.
LOL at bulb holders - same cowboy probably broke them taking them out lol

[Venom]

One bent rear arm and one that's replacing it. Effort to get it out is unreal due to its bolt fouling the diff. New drop links, springs, shocks and mounts going in too.

[318is-joe]

Nice find! They're unbelievably flimsy aren't they - I know they act as a tie in tension but still... Should be tip top with all your refreshing.

[Venom]

Also knocking exhaust gone