Get the original stuff fixed, then diagnose the problem with us online. Use a camera to take pics of the steering box mount (yes you will have to remove a wheel, put the car on stands and actually get underneath it). There are basic things that can go wrong with these, I've never heard of a $1300 steering box- AFAIK the steering box on all e34s is the same (please someone correct me if I am wrong) the 535i is very common car- shares most parts with e32 (7-series) and others so this sould be weird of it is the case. Why anyone would charge $1300 to rebuild a steering box I don't know- its a basic job- unless the problem is really just the car taking up space at the shop whilst the box is away being rebuilt, once out it is hard to get the car out of the workshop and safely out of the way as one usually needs workspace to make money fixing other cars... are you really paying for this perhaps?
I've never seen a dead steering box on an e34, but I guess it can happen. Thing is, can you trust these guys??? I bet Artem (the guy parting out a 525 on this forum atm) will sell you his, and I bet it would fit. You need to look the parts up on the online ETK and cross-reference the vehciles in questions to see if the part numbers are really different. Sometimes there is a replacement item due to a manufacturer change during production (or later on) so a substitute part number is introduced. Best of luck, Nick