Having sold my 4 yr old M3 to buy a new GTI, I can honestly say the GTI is
- more fun to drive on public roads
- so far, much more reliable (although ages were different)
- significantly cheaper to own.
On a warm sunny day when the M3 was not in the local dealership being fixed, the car was simply awesome. The same was true on track with the DSC switched off - the combination of M-diff, smg and 8k red-lining straight 6 was just amazing - the noise the engine makes is truely magical and it's the one thing I really miss with the GTI.
Having said that, the GTI is more fun to drive on public roads. The steering is so much better than my M3 and the spread of torque still gives the impression of rapid (if not ballistic) acceleration.
The only downside to my GTI is build quality - it's not the same as a bmw and it's been back to the dealer 3 times to have rattles fixed.
I bought my GTI because the M3, whilst amazing, was too much for normal driving conditions and far too expensive. With the new model just around the corner, depreciation was frightening and this will only get worse. Warranty costs shot up in Feb-06 to £1100 - 1800 depending on mileage (60k) and there's also a £250 xs on every claim. You also have to make sure the 1st service is done on time too, otherwise you'll end up buying a car you can't sell and one that BMW won't honour if something goes wrong with the engine.
To sum up, I had an M3 for 1 year and it was a mixed affair. I've now had my GTI for 6 months and putting rattles to one side, it's great.