I agree - a nice 325is is your best low money bet. The price difference from a good condition M3 and 325is (e30's) is a good 8-10k. With a 325is, and say 10k invested, you'd have a car that would blow away the same year stock M3.. Easily. New engine or rebuilt current one, SC (or turbo, your FI choice!), suspension work.. *drool* Better than the M3 with 10k invested is being stingy actually..
I'm biased though because it's what I want to start working on in about a year or so. Just working on getting the wife into a bmw wagon first, then I can buy a car to track and really have fun with at road atlanta.. Without getting yelled at..
But if you got the bucks, and can find a good e30 M3, (rare to see for sale, there are a few on autotrader, just to get an idea of the $) they are incredible..