Lane, if you look through the thread below there is a picture of the inside of the bellhousing, the clutch fork and the pin.
https://dorkiphus.net/porsche/showthread.php?t=37205
When I first got my 97 e36 I could not push the clutch all the way down. when I did I get some very horrible grinding feeling. Not fully understanding the potential issues I figured it was just the clutch itself. When I removed the trans, I found the little plastic fork pin (picture in the thread) was broken and the fork was no longer connected on the passenger side of the bellhousing. so I am not sure what was really happening when I pushed the clutch pedal in.
So there is some movement, but I don't think it should move real free unless the fork pin is broken (apparently a common problem--they now sell a brass pin). If you are able to move that around freely, I would venture your pin is broken and the passenger side of the clutch fork is not connected to the housing.
when I did mine I swapped out the shifter bushings also...the car shifts like it was new.