SQL Server is doing the conversion BEFORE any filtering. Since you are OR'ing the criteria I would recommend using UNION ALL like this:

SELECT

M.modelid

FROM

dbo.Models AS M INNER JOIN

dbo.ModelAttributes AS MA

ON MA.ModelId = M.ModelID

WHERE

(

MA.AttributeID = 29 AND

MA.Value LIKE N'%IL%'

)AND

(M.ProductID = 2)

UNION ALL

SELECT

M.modelid

FROM

dbo.Models AS M INNER JOIN

dbo.ModelAttributes AS MA

ON MA.ModelId = M.ModelID

WHERE

(

MA.AttributeID = 7 AND

(

CONVERT(DECIMAL(10, 5), MA.Value) >= 0.0360 AND

CONVERT(DECIMAL(10, 5), MA.Value) <= 0.0840

)

) AND

(M.ProductID = 2)

I also eliminated the unecessary conversion to NVARCHAR(128) in the first comparison. By using the conversion function you are keeping the optimizer from considering an INDEX SEEK.