Best bet would be to head over to
http://www.bimmerforums.com/forum/fo...1995-2001-(E38) if you haven't done so already, some of the members there are very experienced with the E38 as well as these problems.
If the trunk lock is completely horizontal, you'll need to turn it counter-clockwise back to it's vertical position to re-engage it.
What happens when all the doors are closed and you press the central lock button inside? What happens when you try to use the lock/unlock button on the key fob? Does the alarm system engage and the door locks stay 'unlocked'?