Hi Bro, Am sure you will get lots of responses on this, so here's my 2 cents worth (I got myself a Jap-spec 530 BTW)
1) UK or Japan Spec better? JAP IN GENERAL ARE BETTER SPECCED. SOME UK CARS DON'T EVEN HAVE POWER SEATS, AUTO AIRCOND OR HID LIGHTS! SO CHECK CAREFULLY BEFORE YOU BUY. IN GENERAL ALSO, BMW IN JAPAN IS STILL CONSIDERED LUXURY CAR SO THEY TAKE CARE OF IT MORE. UK IS MORE LIKE MID RANGE CAR SO IT'S TRASHED AROUND A BIT MORE. JAP SPEC ALSO LOWER MILEAGE (BUT CAN BE FAKED). HOWEVER IN GENERAL IT IS ALSO TRUE, SINCE PARKING IN JAPAN IS HELL EXPENSIVE, SO MOST CARS ARE JUST USED AS WEEKEND RIDES
2) What are the important to look for? MAIN THING IS ENGINE & GEARBOX, WHICH YOU SHOULD BRING ALONG A GOOD MECHANIC TO SEE. THEN SECONDARY FEATURES SUCH AS ACTIVE STEERING (REPLACEMENT UNIT COSTS RM10K!), ALTERNATOR, IBS. OTHERS WOULD BE WHAT FEATURES IT HAS (E.G. SATNAV, 8.8" IDRIVE SCREEN, AUTO AIRCOND, POWER SEATS, HID LIGHTS, ETC)
3) How to test thoroughly to check if there is any problem? BRING UR MECH
4) Heard UK spec will have more problem because of the rusting during winter? TRUE IN A SENSE, BUT JAP ALSO GOT SIMILAR PROBLEMS. CERTAIN RUBBER PARTS ARE NOT MEANT FOR OUR WEATHER.
5) What is the average interest rate of a recond car? NO IDEA NOW
6) Is the iDrive GPS workable in Malaysia? NOT FOR JAP-SPEC
7) 523i or 525i? 530!

... SERIOUSLY, DEPENDS WHAT KIND OF DRIVER YOU ARE. TO APPRECIATE THE CAR BETTER, SHOULD BE 525 M-SPORT