Firstly the bus between the E34 and E39 is differant, so you are going to battle to integrate many things, such as the cluster, it simply wont work on an E34 DME.
Now, dont get me wrong, I think this would be an awesome project, I still want to retrofit an E65 interior in an E34, but its not an easy job at all.
To spite the physical fitment of everthing (i think the E39 dash is bigger), the heater core may give you troubles fitting, the electrics are going to be a challange. This could be a 3 to 6 month build, your not quickly going to do it on a saturday morning.
Under those conditions, go for it, if your not prepared to do that, rather dont.