Flywheel or the other thing? Flywheel is on the back of the engine, the other thing is on the front. The M20B25 (not sure about the other engines in the E30) has the crank reference sensor at the front of the engine and reads the "teeth" (the sensor is inductive and the "teeth" passing by give pulses). The missing teeth are on purpose to distinguish a certain point in the rotation of the crank.
As for the flywheel, if you're missing teeth there, depending on how bad it is, you may have trouble starting the car using the starter, but that's as far as the problems go (at least for the M20B25).