Skip-
I just saw this thread, but thought I'd chime in, even though it may be too late. I have gone with substantially shorter gears in my diff than the other responders on this thread. I bought a 3.91 lsd from a BMW recycler in the Bay Area called Bavarian Auto Recycling. It is the stock diff from a 1993 325is coupe and cost $539 including tax and shipping. My motor is a Windsor stroker that puts out 400 rwhp at 5500 rpm. It is mated with a TKO600, and gives shift points that are around the same as for my BMW M3. The acceleration is awesome (my data acquistion says .6g) and the price was much less than the places that do custom diffs.
There are a couple of downsides. 1) I'm sure such short gears are one of the things that is killing my gas mileage. 2) During hard track driving, I get
oil being pumped out of the vent hole, so I need to improve the cooling, either with an external cooler or a finned cover, which may negate some of my savings by using a recycled stock unit.
Hope that helps a little.
(the other Skip)