What else will cause my BMW 325i E36 to overheat and lose power?

Hello, Good find on the milky residue. You may have a bad head gasket or intake manifold gasket, cracked head or block. You need to run a compression test, dry, then wet, and then do a leakdown test on each cylinder. If it passes compression and leakdown, replace the intake manifold gasket, if not, time to pull the cylinder head, magnaflux the cylinder head, replace the head gasket, and inspect the cylinder bores for cracks/damage/coolant around the pistons. The coolant inside the oil cap had to come from somewhere, and I would recommend letting the engine sit for 24 hours without running before checking the dipstick.