A: That would depend on the year…
The E36’s M50 and S50 motors were pretty free breathing and cammy, perfect for a weekend in the canyons and best paired with a manual.
By contrast the M52 and S52 were more torquey in everyday conditions but they didn’t sing at high revs. The manual M52 was paired to long gearing that saps some of the fun but is still preferable to the 4 speed automatic.
E46s had terrible manuals thanks to the CDV and electromechanical or electronic throttle. 01-> rear wheel drive cars had a ZF tranny rather than a GM one with closer gear ratios.
Similarly the E46’s M52TU (‘99-’00) was pretty muffled while the ‘01 and later 325i liked revs. Oddly the 3.0L is relatively rough due to its long stroke – the ZHP Performance Package’s different cams and management gave it more zeal but its hard to shake the fact that this engine was meant to haul the mass of the X5 around.
So far my answer is simply taking into account engine note and torque curve, but there’s more to consider such as build quality (the E36 feels more disposable, the E46 more like the E39 - meant for a long service life) throtttle response (which McLaren F1 designer Gordon Murray agrees is more important than horsepower – >‘96-’98 M52/’96-’99 S52 sharpest) or chassis feel/handling balance. (I don’t care for anything on staggered rims, aftermarket Limited Slip for non Ms after 96 is a must. The 95 M3 my favorite E36 chassis, followed by sport pack non M – the 3.2L M chassis is too biased towards high speed stability. Considering E46s, ZHP E46 on lighter wheels or 03 and later 325i sport feel best, the Xi surprisingly is most neutral of all and can be faster from point to point as you don’t need to slow for rough pavement – it feels the closest to the way BMWs used to feel – long suspension travel, dirm damping).
The E46 had 3 steering iterations: heavy/vague (due to slop in bushings)/slow, light/precise/slow, then heavy/precise/quick (some say excessive weighting), I can’t decide if I like the 2nd or third one better overall – depends on tire size (my favorite being 205/50R17s all around). Suspensions didn’t gel until the 02-03 model year – before that the base models seemed underdamped/somehow Japanese and the sport packages too nose led and soft at the rear. Later base cars were almost too firm – many who get sport packages would be surprised at the balance and composure of the base cars…
Basically you have to try them all as I have and decide what you’re most sensitive to, but at least now you have a sense of how many differences there are from year to year…