Looks like you have the socalled seat back twist, here some instructions how to shorten the cable
http://www.pagaduan.org/bmwe32/Fahrersitz.htm
English, nice info from Winfred for E34/E32
http://bellsouthpwp.net/m/i/miales/seatcablesfix.htm
Also go to my website below, on the link to Gale there are more instructions about seat back twist, seat back motor, and also how to change the gear of the seat.
Headrest: pull the headrest once more out and then push it in again, it seems that the 2 brackets of the headrest are not fully set into the gear of the system.