I would do a compression test on all cylinders and compare the results with cylinder #3. Give it a dry test, than try pouring a teaspoon of motor oil into each cylinder for a "wet" test. The scores on the wet test should be slightly higher than the numbers you got from the dry.
If you get a really low score on #3 on both tests it usually indicates that you may have a broken head gasket, burnt valve, or bad piston rings.
Since it overheated, chances are it damaged the cylinder head.. Aluminum expends drastically when overheated, from what you told us I'm guessing it's what might of happened.
Like I said man, a compression test would really set you off with the diagnosing procedure. If the compression test gives you good numbers, than the issue is with the ignition system. (spark plugs, distributor, etc..)
Let me know how it goes, I would be glad to help as much as I can.
Entry level Service Technician
BMW Gallery, Boston.