I struggle to see how just a filter like that will do what you need it to do. Remember, it isn't filtering particles out of fluid, that isn't the function of a catch can at all. It is taking vapor (and some fluid) and letting the heavy particles settle in the can and on the media and letting the cleaned air pass through to the intake. Remember one big difference with the E46 vs other cars is that it needs to be under vacuum. Not sure the fuel filter is enough on a car that will be pulling that much vacuum (and stuff) through the filter.
Yes, that kit is perfect, though I am not sure what the baffling looks like. However it would be better than mine in that the fittings are larger and you wouldn't have to step down the hose as much as I did. And if I WAS going to drop that much coin, it would be for this one.......http://www.mishimoto.com/mishimoto-b...catch-can.html
But this is the one the guy who I stole the idea from used, and it is about perfect. I think I will put one under my tree for myself this year...
http://store.42draftdesigns.com/Stea...Can_p_289.html