certainly, until audi releases their 2.8l 30 valve in the usa, comparisons with the bmw 328 are going to put the a4 down on performance. the 328 is a fine car with a good engine.
better service (free)
re: the quality, i remain disappointed with the quality of the interior of the e36. cabin fitting is poor, the quality of plastics the same, although the cloth looks good.
my colleague's m3 routinely loses it's plastic blanking plates from the roof during a hard drive. the seat lifters have broken on each side twice etc.... it's just not good enough. and not nearly as good as the old e30.
certainly at the top end of this market segment, i've had a lot of exposure to the 286hp (euro) m3 and would prefer my s2 any day. the mtm a4 1.8t (286hp) i drove would knock the m3 into the dust (for 2/3 of the money)...
i love the m3's motor though. a real gem.