You can raise the ride height by putting thicker pads under the rear springs, BMW sell them or you can buy discs on eBay - 9mm pad will increase height by about 15mm due to suspension set up
You could gain some space by trimming the arch lip back, the top of the wheel will move inboard when the suspension compresses, z3's run excessive camber at the rear when lowered so the wheel might not rub on a trimmed arch
Alternatively using z4 hubs and e46 solid rear discs bring the rear in by 23mm each side, Chris took a photo its in the wheel thread on the forum
The fronts should fit in the arches with the coilovers but your turning circle might be limited
Personally I liked the picture of the 205 70 tyres on the wires you took in italy
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