Those that said the E46 M3 is underpowered probably have NEVER wound that screaming inline 6 all the way up to the 8,000rpm redline.
The S54 makes plenty of power. What it lacks is LOW-END torque. The bulk of the power is delivered up top, and few engines pull all the way to the stratospheric deadline like the S54 does. And no matter what BMW tries to sell you, no turbo charged engine can match a NA engine with individual throttle bodies for responsiveness to throttle tip-in.
However, if you drive the car like a sedate sedan between idle and 3,000rpm, the 265 ft-lbs of torque doesn't come anywhere near the turbocharged engines BMW makes now. Then again, if all you're going to do is cruise the freeway at 70mph all day long, any M car is probably an overkill.
Take that E46 M3 to any local track and you'll understand.
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