A smaller, turbo charged engine driven gently will potentially give better fuel economy, but as soon as you push it hard, it will drink far more than a slightly bigger NA engine such as the one in the 325i.
The power delivery of the s3 is such that its pretty dead below 4000rpm, and if you like boost, you'll find the power quite addictive. It will definitely feel (and be) a lot faster than the 325i, but the engine sounds lame, and I reckon will be heavier on fuel. Its also quattro.
I can't stand the S3 because I think the engine throttle response and power delivery is terrible and very typical of high output 2L turbo. I hate it, but this is just my opinion. The 325i will sound better, have much smoother power delivery, probably be more efficient, but it will also feel a lot more sedate when driven hard. I also agree that an M-sport E92 is an extremely good looking car.