Funny you should say that about the increased surface area...
the Paper filter actually has more surface area than the K&N Drop in filter... more pleats and deeper as well
Some issues have arisen from using a K&N type of filter (regardless if it is a drop in or ther is a CAI aspect involved) as the oils from the filter CAN and HAVE gummed up the MAF sensor and made it read improperly... messing up the power
ALSO, these filters let in particulate matter that is larger than the paper filters (which is why they CAN let in more air) due to the fact that they are oiled cotton (essentially)
Personally I think there is more power to be found in the programming and exhaust than in the intake... the E39 (540) already routes the air from the passenger side behind the lights