Well, I have come to a conclusion. I've checked dipstick dozen times before, it did not have chocolate milkshake. It does now, for some reason.
Definitely head/HG is blown, but I don't know what to do next.
a) Sold as-is and get another one? A friend of mine is selling his 02 330i w/ Mtech1 for $4500. But the problem is, I don't know how much I could get with my e46. It has a lot of new engine/cooling system parts, new suspension parts, etc etc.
b) Swap the engine? I found a 328 engine with transmission for $1800(or $1k for engine, $500 for 5spd stick swap), but plus labor($700, found an indy mechanic)..I'm not sure it's worthy at all.