I can only second the advice of the prior two posts --
jack each front corner up and shake the wheel around to
see where there is play. My first guess is also that it
is one of the ball-joints; there are two on each side and
they work to keep the tire perpendicular to the ground and
when a ball-joint fails the tire is free to flop about at
will; in this configuration the car does not behave as it
should -- it no longer turns where it is pointed and
important bits get scraped on the ground.

I took a ball-joint off of my 164 and I was terrified at
how loose and floppy it was relative to the new replacement.
That one was only squeeking sometimes not all the time.

The suspension goodies are not too expensive; I'd buy new
bits at www.bimmerparts.com and any shop that knows how to
work on 60s american cars will be able to do the work for
you.

While you're getting stuff done, I'd suggest you plunk
down money for an IPD swaybar setup. It makes a dramatic
improvement in the way the car feels and drives. Best chunk
of money I ever spent on something I didn't really really
need.
chris