the E36 320 is running with a race tuned bored and stroked M42 engine from the 318is... The engine internals are not available for sale. I remember it is running with 86x86 bore:stroke configuration, stock M42 is 84x81 bore:stroke... Max Power is limited to 280bhp as per regulation... The high pitched transmission whine is from the straight-cut sequential gearbox.
The E36 M3 had limited runs in races as there weren't many categories for it to be successful in..
Also, 4 cylinder engines are more favourable in race cars of 2.5L engine and below. Due to the lighter front end which translates to better maneuverability.