BMW's cats are 99% free flowing, removing it won't do a damn thing except make it louder. Anywhere you read, you'll see that nobody really can improve on bmw's exhaust designs, except to make it louder or have a better sound. Get a Conforti chip, you'll be so happy it, plus your gas mileage will improve.
Also replace the normal things, plugs, belts, etc. You'll be surprised how much new sparkplugs will help.
BTW The brake circuit thing is common on e36's. The plastic twist in thing for the brake or tail lights has a few failure points, mostly the soldier contacts.