I am dealing with some of this right now...My cats are bad...

I believe you should just buy the Russian headers which apparently fit right out of the box and flash the EU2 tune to your E53.. Do you NEED to pass emissions in your state? In my state (MA) i don't after 15 years. I flashed the EU2 tune to my '03 530i and still get an inspections sticker ea year.

People who have done this (install headers) claim an extra 10-20 hp..You may not get much in the way of extra sound.

If you're willing, to could likely sell your cats to pay for the headers.

I am hearing the O2 spacers will NOT be enough to prevent a CEL...I also hear some aftermarket cats. I have yet to see anybody on E39, E46, or E53 install headers and O2 spacers and not have a CEL (without the EU2 tune).

Even though my cats are bad, they are not plugged. I tested them for back pressure.
My plan is just to flash the EU2 tune and leave my bad cats on.