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BMW archive proves it's an original VO 1M. (Any repaired 135 would be released as re-manufactured 135. The conversion between 135 and 1M is a too costly an cumbersome especially for BMW)
My guess is that something happened befor it was sold to previous owner (transport or test drive). He got some deal compensating him for the title status, I hope so did you!. This prior history is also the main reason why the DMV is not going to care what the previous owner states. Not suggested as there's so little chance that there's any easy mix up of status, but if you must know details, try the original dealer. (at least it may support your story should you ever want to sell)
As DMV generally does not care about the complex emotions of salvaged car title holders: go for the salvaged title and do not be temped by any bruising of your ego.
As it has been inspected properly: The 1M is more awesome than we can convey: drive it, enjoy it and please post pics and impressions!
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