The M20 325i has more torque but slightly duller handling. The M20 is more durable and has a bit more headroom for performance improvements. You can also get an automatic with it...say if your wife will only drive them, that's a downright advantage.
The M42 e30 is rarer and far more advanced - needs less routine maintenance. No timing belt and no valve adjustments. When things do go wrong, they're a lot more expensive to fix though. Overheating is a chronic M42 problem that the M20 doesn't seem to suffer from.