I noticed it looks rusty in there. Could it be? What shoudl I do? I alswo noticed some oil in 2 spark plug wells, especially one by the firewall. I've read that this is from bad valve cover gasket. Do you think new valve cover &ngasket should do it? Is it DIY job? How much 4 parts? NE1 selling covers?
thanks
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The rust could be from a build-up of condensation. Do you drive short distances often? Do you get the car up to full operating temperature and keep it there for a while? If you don't let the car get hot and burn off any water/condensation that forms overnight, then it will cause rusting. You might be able to get it off when you get the valve cover gasket removed. Easy, innexpensive DIY. Once you remove the cover, just see if you can get the rust off yourself.

do you have a write up to replace a value cover

Is it anything like this

Most likely sludge due to the gasket leak. It helps to make sure the engine oil gets fullly warmed up too.

Here is a write-up e36 valve cover gasket (http://www.bmwm3how2.com/techarticles/general/e36valvecovergasket.html)