1992 BMW 325i - - light on dash and then wont downshift?

Yes, it is likely to be a $50 part, but unfortunately that $50 part is a pressure switch, which live inside your Auto box.
This pressure switch directs which 'vein' the box fluid goes down, each vein is a different gear.

So the box is going to need to come out, stripped down, 1 minute to remove the old switch, 1 minute to get in the new switch, put back together and bolt back to the car. So that $50 part is going to need about $1000 mechanic job on it, which is a real pain.

In the UK, as there is so many E36's around, it a lot cheaper and easier to just get a new box.

it normally works out for the best.

The light that looks like a little gear is the "check engine" light for the transmission. The computer has tried to deal with an issue and it could not work it out. So the car goes into limp mode, so all you have is one forward gear and reverse. Transmission is likely shot.

The light that looks like a little gear is the "check engine" light for the transmission. The computer has tried to deal with an issue and it could not work it out. So the car goes into limp mode, so all you have is one forward gear and reverse. Transmission is likely shot.