I recently took a test drive in a E46 M3 SMG and a 6 speed manual, All I could say was WOW!!! There are no words to describe the feeling I had!
The E46 M in my eyes is a legendary M3, I own a German Spec E36 M3 I have driven the V10 M5 and for me the winner is the E46 M by far in terms of the feedback the car gives you! it has all the little gadgets you need, its incredibly responsive and it sounds like a super car! There is nothing short of a ferrari or Lambo that produces the beautiful tones that the car produces, it screams at speeds and purrs when its ideling! its one of the most awsome cars I have ever driven if not the best! To me it felt like a super bike with 4 wheels! That is the best way I can describe what the car felt like to me.
The 335i on the other hand (And im talking the Coupe) is fekking sexy looking car, and with a drop, nice mags and a few little upgrades here and there it can look really beautiful and very aggressive! with Software and a few other bits and bobs it teleports you from A to be in pure luxury and Style! But I do belive that it looses Value incredibly quickly and as others have said every other person has one! so its a very common car these days, if that doesn't bother you then a 335i is a great car but personally I would rather go for a 135i as it seems to look a little more sporty and obviously its lighter so will be a bit quicker so if its a fun toy your after then a 135i is definately not a bad choice, they also seem to cost a bit less than a 335 coupe from what I have seen lately on car find and the likes.
Modding a Turbo car is obviously allot cheaper and quicker too. But in the long run I think a M is allot of fun!
