Okay, so here goes my lengthy opinion on the matter:
I admit i have yet to drive or even experience an e9x M3 or a 335i. I therefore think its better then from my side to give an objective opinion on the matter.
Lets just consider this point for a second. Do you think that when BMW sat around the table they thought, Well, our M3 should be our most prized 3 sereis but lets make a 3 litre twin scroll/twin turbo car that will out perform it, but lets base it on the same chassis as the lower ranked 3 series in the line up. We will use a smaller engine, uprated but not "performance" brakes and suspension and voodoo will do the rest.
And if you are a x35i owner and swearing at your screen now just wait till im finished. The M3 is puprose built to compete against the likes of the best performance cars in the world. This was NOT the purpose of the x35i.
The x35 is built as the step just below the M3 but as "luck" would have it, and i use luck sarcastically here, it has massive tuning potential. Therefore our friends at BMW have left it to us and tuners to do with as we please and gifted us with a great platform. One could almost say that the M3 is developed by siuts at BMW while they offer the x35i to us as a "DIY M3".
Why then, i ask with tears in my eyes, is there a debate on which one is better. The PURPOSE of each of these cars is radically different. Why then is it a case of, My dad is stronger than your dad, we are so accustomed to in pre-primary school?
Yes, a x35i may be faster than a M3 when its tuned. Or a M3 may be faster around a track. So what?
I will admit that in terms of other manufacturers there is no M3 benchmark anymore. It is now a x35i/M3 benchmark and if my 200sti can beat it the ground before me shall be worshipped. And just FYI i don't own a 200sti.
I congrats every owner of a M3 and a 335i for owning a piece of engineering brilliance.
As for the fight amongst ourselfs, just remember, theres a citi golf thats faster than both of you