Hi Unbeemered - sorry for the hassles you’re experiencing.
I have both a lot of experience with vintage BMWs and with SeaFoam. Generally speaking good experience on both - let me share my thoughts with you.
First of all, “could SeaFoam” have caused the head gasket to fail. I’m going to answer that as “yes and no”. I actually read your post on my laptop while I was at my friend’s independent BMW/Mercedes shop waiting for my 2002 330Ci Convertible to be brought around, so I asked the owner. His answer was “by cleaning action - not likely” but he brought up a potential issue that I haven’t seen anywhere in these posts - excessive oil pressure brought on by overfilling the crankcase. Here’s the issue - your car is designed to operate within a specific range of oil in the engine. Too little and the oil pump pickup can suck air or “cavitate” causing poor oil pressure and bad lubrication and ultimately, engine failure. Too much and a variety of other issues can occur. The one most applicable to your situation is that your engine can build too much oil pressure - air is compressible and fluid, especially oil, is not, too much oil, not enough air and the oil pressure can build up above specification. In an engine without a pending gasket failure, that isn’t a problem.
Which was his point - he thinks that what could have happened is that you had an impending failure - a weak point in your head gasket that was probably already leaking a little coolant into the engine but not enough to be noticable - it was burning off and you never knew. Then, your boyfriend added a large quantity of SeaFoam to your engine and that pushed your oil pressure up just enough to cause the breach in the gasket to open to the point where you noticed it.
About SeaFoam - I use it a lot. I have several small engines I use it in, I use it in my cars, and more. But, the trick with SeaFoam is to use VERY small amounts. In my cars, I use about 3 ounces into a TANK of gasoline. Into the crankcase, I will add 1/2 quart, when the oil level is down to allow adding it, and then I’ll change the oil shortly (250 miles) after. In my snowblower, lawn mower, etc. a capful into the gas tank every 3 or four fill ups. I do and have used it for force-cleaning the fuel injection in a car or the carb in a small engine - you simply inject it into the carb throat of a small engine, or inject about 20 ccs through a vaccum line of the engine. It cleans the engine and makes it smoke like a barbecue for several minutes while it works. Again, the trick with SeaFoam is to follow the label instructions like religion.
Onto “what to do about your old Bimmer”. Your BMW is a what’s known as an “E30” - that covered I think 1983 through 1991 (I might be off by one or two years there) and BMW shipped a LOT of those to the United States in those years - it’s the time where BMW changed from being a boutique performance brand to being very mainstream in the USA and the 3-series car/the E30 was the mainstay of that.
I have three 3-series BMWs - a 2007 328i Sedan, a 2002 330Ci Convertible mentioned earlier, and we have an E30 convertible - a 1991 325i convertible that we bought this fall. The car is fantastic - about 130,000 miles, runs like a champ. But we paid very little for it - $3500. Which comes to my point. I think putting $1000/$2000 out to repair your car probably isn’t a smart expenditure of money. My e30 convertible, at 115k has “everything done” - it had a recent timing belt change, new radiator, new water pump, new hoses, new belts, etc. Compression was solid on all six cylinders and it’s perfect.
I’d say that unless you have a really special attachment to YOUR particular 328e, I’d consider selling it as a parts car to a collector of these - you can probably get $1000 to $1500 for it, and then take the additional $1000 to $2000 and buy yourself a newer version of the car, or a convertible, or some other nice e30, with far fewer miles on it and you’re back in business.
My 2 cents from a SeaFoamer/Bimmer Owner.
Have fun, whatever you do!