So, after finding the problem and replacing my rear intake manifold cover, which was dumping oil into the engine, I now have some other quirks. My check engine light popped on, and stomp test read 1221 (#1 O2 sensor). With this error however, the car still ran OK so I have held off doing the sensor. Now that it is getting colder, the car is now idling at around 500rpm, and I get a nice shaking sensation at idle, and doesn't seem to clear up when the car warms up.

I know an O2 sensor could possibly do this, so I do plan on changing that.
When I did the rear manifold cover replacement, I also got all new plugs (not stock though :( ). Someone mentioned maybe a temperature sensor of some sort could be causing this, and maybe even a bad intake filter. So I got a new filter since thats cheap and easy. Does anyone think a temp sensor could also be causing this, since this started with the cold weather? And if so, what sensor is it??? Anyone have other suggestions? Should I really go back and get some factory plugs too?

For those wanting info on the rear intake manifold cover fix, here's my thread on that one: http://forums.bimmerforums.com/forum/showthread.php?t=607157

I have an 89 735i. My head gasket blew and when I got it back from the shop, the car idled rough and my "Check Eng" light came on. Mechanic got a similar code: o2 sensor. Replaced the o2 sensor. Still rough idle and light. Found vaccuum leak fixed it, same problem: rough idle and eng. light. Tried to start it Friday and cranked but wouldn't start.
CHECK YOUR IGNITION COIL. Test the resistance with an ohm meter. Correct ohms for mine (and I think your's is the same) Terminal #15 to #4 (where the coil wire plug into) should be about 9k (9000) ohms. #15 to #1, about 0.4 ohms. Mine tested bad in the cold weather outside but when I brought the coil in the house, where it was warm, it tested good. Intermittent failure.
The igniton coil is the part that your coil wire plugs into. It only take a few minutes to remove and test. Also, if you replace the o2 sensor, use oem, the universals have a bad reputation for not working properly. Besides the oem are easier to install.
Hope this helps.

Well, ignition system seemed fine before the work I did. I really think the problem might be in the crappy plugs I bought. When I was doing the work, I started to get low on funds, so when I bought new plugs, I bought the cheapo plugs (I know, shame on me). So I have ordered all new plugs (OEM) and got a new air filter. It may be time for a new fuel filter as well.