Hi Dod, as mentioned this is a very individual choice.
I had an 1.8 E46 with Pipercross Direct Air Induction kit which was complemented by a twin 73mm Sebring exhaust and the car was running smoother and less "blocked".
At least this was my impression.



My 318is at its beginning had a K&N induction Kit with heat blanket and Scorpiom Exhaust kit and here as well everything ran smoothly and less blocked.



Last not least I now have 318i estate where I opted for a Green Panel Air filter.
It will give you better performance compared to the standard one, it is washable so long life and it is just a straight swap with the normal filter. This all giving the complete OEM look when popping up the hood.



What I can say from the different setups in 3 different cars is that:

- If you are going for Direct Air Induction go for a less restricted sport exhast as well. This way you will have more air coming in compared to the normal Filter but fumes will also get out quicker

- if going for a Direct Air Induction do go for a Heat Blanket or get it as isolated as you can from the engine heat; my E46 was without heat shield and I can assure you that in warm days with the engine warming up the car would suffer performance wise compared to winter days where it would really rev up nicely so cold air feed is vital as mentioned also by Jimmy325ci

- try to get a cold air feed from the lower part of the bumper as suggested by KevinF pointing it towards the Filter. This is what Cab of Super4 has done to his 318is to get cold air feed to his DAI K&N:



More pictures on it on his Thread at the bottom of page 4 (picture heavy) http://www.bmwhaus.ie/forum/showthread.php?tid=680

If a DAI kit only is installed it will make a lovely sound when aspirating more air this above more or less the 3,5k rpm range.
This sound will however be less heard and evident when installing a rear sport exhaust.

My two cents based on my personal experience ? It is not worth to install the DAI without exhast as gains will be minimal and only thing you will get is a higher aspirating noise.

Best setup would be:

OEM: Panel filter, Sport exhaust
Sport: DAI, Cold Air Feed, Heat blanket, Sport Exhaust

By Sport exhast I mean Eisenmann, Sebring, Scorpion, Supersprint etc so sporty which have Tüv approval and are legal due to CE directives which will keep you passing NCT with CO2 emissions and DB noise levels.

Hope this has been of help :smiling:

Let us know how you get on