I had a similar problem with the barrel jammed in like yours. You have to remove the steering wheel 1st (0 = unplug the battery, caution to the airbag), and the upper and lower covering (better remove the lower trim panel 1st) to uncover the steering lock aluminum device. You need torx bitset to remove the airbag from the steering wheel, the screw are not super accessibles behind the wheel. There are write-ups and photos if you look for it, I used those very well done write-ups:
Steering lock assembly removal and replacement
Steering lock replacement
even my story on replacing that;
http://www.bimmernut.com/forum/5-ser...on-easily.html
Ignition lock difficult to turn and doesn't come back to ON position easily
Not that difficult job, just get the tools (small rotary tool with cutting wheel, a good snap-ring pliers, a T20 torx bit, a clamp or wrench (see bimmerboard post 779065) etc.), its a 2 hours job or so when it's 1st time.
With you steering lock in your hands if you cannot remove the barrel it's because it's retaining little plastic square is stuck even if you insert the small allen key in the hole near the key. Did you try pulling very hard the key in every different position (turn the key 0.5mm or so at the time then pull hard)? If not no choice buy a new ignition tumbler with the steering lock. If you're not in a hurry (and can spend extra $60-$80 extra) better buy the coded key from the dealer or if not you'll have different keys for doors/trunk and ignition.
Best luck,
Alex
1993 (build 93/05) 525i automatic M50TU (vanos) 263K miles (ca. 423000 km) in Montreal, Canada (bought the car 9 years ago in San Diego, CA)