This is a great all-around car with few compromises. I traded a 2003 M3 for my S4. I love the S4s V8 rumble, MUCH better than the M3's metallic howl at higher rpm. The S4 is a technology showcase (w/ NAV.sys) vs the basic M3. The M3 wins by the numbers (0-60, slalom times, etc), but the Audi is easier to live with and more luxury. The AWD S4 pulls effortless out of a corner; the stability system remains invisible unless real trouble is at hand.
V8 sound. Precise, short-throw shifter. Quattro AWD with stablity control: makes mindless acceleration easy and risk-free (the understeer is quite predictable).
Needs to shave about 200 pounds to be more competetive. Fuel economy needs improvement. Clutch should be more linear and less abrupt... makes driving smoothly very difficult. More (sporty) exterior details to distinguish the car from an A4.
I agree with most of what you're saying but you're comparing an M3 to an S4. The M3's comparable is the RS4. The 335's comparable is the S4...which in my opinion the 335 is nowhere near as good as a car as the S4. And the 328's comparable is the A4. Why does everything having a fallacy of comparing the M3 to the S4. People need to start comparing the M3 to the RS4 then we'll see just how great BMW is. Audi is an awesome brand all around and the S4 is an excellent daily driver as well as an outrageous car to own in my opinion.