Earlier e39's suffered from the nkasil problem where the bores would wear prematurely. As an S reg, its likely that your mates car would not suffer with this (it is possible though, depending on build date). These were M52 engines and there were no overheating problems associated with the nikasil problem as far as I know.
BMW cooling systems have been known to give occassional problems, the main problem being the viscous coupling to the fan. This can cause the engine to overheat and in extreme cases could cause the block to crack. I don't know that BMW have ever acknowledged this to be a problem or that people here would hold that view. Potentially any car can overheat and I don't know if BMW's are any more prone to it than any other brand.