Amazing balance of performance and practicality. Research the VANOS, cam bolts, and rear subframe. Upgrade kits and parts are available for all. They can cause major damage if not inspected and addressed (if nec., as far as the subframe). Convertibles are reportedly less likely to have the rear subframe problem. Skip the SMG - arguably hard to live with, unreliable, expensive. Consider removing the manual transmission's Clutch Delay Valve (CDV). The car can be hard to shift smoothly and fellow owners recommend it, saying doing so solves the problem (I'm planning to do it). Car is a remarkably comfortable tourer on the highway and is equally adept at carving up mountain roads. Seats are the best I've ever had and upgraded stereo (Harmon Kardon) is the best OEM I've ever had as well. The convertible does flex a bit. Top up, there are blind spots. It's also hard to judge the corners of the car from the driver's seat and easy to scrape the front spoiler. Parts and oil can be expensive, but considering the car's performance, it's still a good value. You can drive it like a Honda all day or get on it and accelerate like a hoon.
UPDATE 11/28/16: Still love this car. Had the CDV removed and it does shift much more smoothly. The strong online enthusiast community for these is helpful, friendly and informative. Some people find the e46 M3's ride too harsh; I suspect this is regarding the coupes and the convertible's extra weight improves things. Also, the 19-inch wheels reportedly result in a much firmer ride (I have the 18s). As the cars get older parts can be crazy high, but here again the online forums are a great resource. And a quality, well-reviewed independent mechanic is invaluable.
UPDATE 11/30/19: This is a second-car, so the miles are low - it only has 60K. Had the Inspection II service done at my independent repair shop for around $1,600 after a 25 percent discount from a promotion the shop was running. Other than that, nothing to report. A great thing about the cars is that you can buy aftermarket head units that look stock and have up-to-date features like Apple CarPlay - I just bought an Avin Avant 4 and look forward to installing it.