The E36 is really tricky to bleed, this is what I did: I went to a parking lot that is on level ground very close to me (the car didn't have time to heat up), the coolant level seemed to be just right when I left. I brought with me a what seemed like almost a gallon of mixed coolant. Following other's instructions I set the heater on with the temp controls on the highest setting and fan on the lowest. Opened the bleed screw and the expansion tank cap. Then I started adding coolant, it rose to the top and then it some of it started coming out the bleed hole with bubles, the level would then fall and I would once again add coolant until it is too much. I kept on doing that for a good 10 minutes at the very least, occasionally revving the engine a little bit from under the hood. After a while I checked the temperature and it was dead center, warm/hot air was coming out of the vents inside the car. I noticed that no more bubles were coming out even though I could add more coolant.
After that for a while the car ran perfectly fine, the temp gauge at the center mark or maybe a hair over it. There would be warm air from the vents on demand, everything seemed great, even the "Check Coolant Level" warning wasn't coming on anymore on the OBC. A few weeks back I noticed the temp started rising again when I was at idle, it would keep on slowly crawling upwards, then I moved and it fell down. One other time I stayed at idle and i am guessing the electric fan kicked in which cooled the temp down to normal. Today though it started going up again, as I was at a red light I look at it rise pretty quickly but when I slowly pulled away it started to come down slowly and went to normal. I got home, noticed I need a light bulb, jumped in the car minutes after and it would give me problems starting.
The "check coolant level" warning sometimes comes on and I am pretty tired of this damned thing running hot. Its been a while since I checked the coolant level mostly because in the past it would throw the warning even when its fine and because the car is parked on an uneven surface overnight and it needs to be on a leveled surface to check coolant.
Maybe its because I used highly recomended toyota coolant or maybe E36s continue overheating after the first time they do so. Items replaced: water pump, thermostat, thermostat cover, fan clutch and also the fan blades. It doesn't look like there are any leaks in the system and I am stunned.
Good luck man, I wish you get it solved and sorry for such a long message, I am just a little frustraited with the whole overheating issue.