To start with, cooling the oil will generate cooling for the entire engine. Oil circulates through the valve train, and splashes on the bottom of the cylinders and cylinder wall, which does cool the barrels.
As to whether this is really necessary, it is an open topic, particularly for the smaller engines. BMW choose not to mount a cooler on the R80 for a reason, but this doesn't mean that a hard working R80 in a hot environment would not benefit from one. There are two types of BMW oil coolers: the thermostatically controled units typically mounted on the 1000cc touring (full faired) models, and the later 'always open' type fitted as stock to the R100GS. The always open type helps a bit in terms of adding overall capacity to the oil system, but will slow warm up of the bike.
I have heard comments that on a Thermostatically controled unit, it might only open breifly from time to time in extreme circumstances, but that is when the real benefit is felt. I have also heard that in general the oil cooler equiped engines last longer, all other things being equal.
I purchased an older thermostatic unit for my R80, but haven't installed it yet. I don't consider it essential, and the exhaust has to be modified (to create space for the junction head, where it bolts into the oil filter housing - the non-thermo units are much more flush fitting). The interior of the oil cooler housing also needs to be changed - make sure you look into this before going ahead, a mistake in that area will be very expensive.
[This message has been edited by Timo (edited 28 September 2004).]