To get rid of the noise and prevent future damage, I did a sub frame drop and replaced all the bushings. It took me two days just to get to the point in photo #1 and a few more to figure out how to remove the old bushings. I first started to with a barbaric drill/jigsaw/hammer/chisel method, which was fun at first, but was too much work. I got my dad to help me fabricate some custom tools to pull the rest of the bushings out and push the new ones in.
Total cost was $150 in parts (6 new bushings) and about 4 days of work. I'm sure an independent shop would charge around a grand for this job. Definitely not an easy DIY. I wouldn't want to do this one again :P
I used this DIY from E46Fanatics as a guide. Check it out if you want to see the complete step-by-step.