Ive owned an E36 325is. PO installed M3 suspension on it. It handled very well and predictable. not twitchy at all but low and taught.
That said, its not a very well built BMW. overall the E36 was a disappointment in many areas. Overall build quality is way below E30's, and E46 have proven to be better cars. Interior bits finishes and pieces fail, warp, strip too soon. You don't see this happening nearly as much on E30's which are much older cars. Be prepared to replace control arms/bushyigs every 1/2-1 year if you do any serious driving. An M42/44 is going to be ridiculously slow. If you want an E36, I would suggest you look into Ti's, its basically front half of an E36 with the rear end of an E30, with an M44 under the hood.
Look into first year E46 323i's. These are sort of a best kept secret. In numerous tests, and factory engineers confirm this (i think this was an article in GRM) that the 323 engine is a bit more powerful and quicker than the 325 ones. Basically the same engine but, something about it made it as good or better. They slapped the 323i name on it because they didn't have a "318" barebones cheapest version really.
They can be had, with a sport package, for $3000-6000 easy. Amazing value for a great car. Look into that.
Most E36's you're going to find are beat up junkers.
