A BMW from 14 years ago would've been far better built than a current VW or BMW - back then they were were still considered a properly premium car (too good for the likes of the police and reps) and were the proverbial tank. I wouldn't compare a BMW from 14 years ago to a new VW/Audi or BMW.
I definitely prefer the MK7 interior to that of the 3 series (not by much), the current A3 is a small step up again. There's not a massive gap either way - they're all well above average.
Reliability wise, BMWs (and VAGs) are pretty average these days, you don't buy German for supreme reliability now, and the electrics/electronics are the achilles heel of all modern cars (some have crap mechanicals too). That being said, once any niggles have been sorted under warranty, i'd expect a VAG TDI or BMW D unit to be good for 250k miles, German cars generally look newer for longer, but that may be because they hold their value and are therefore an expensive purchase for all, so they get looked after.
They feel more solid (until we've started thinning the bodywork for "weight savings"), use the most up to date tech, and manage to squeeze power and (relative) economy out in a way the Japs don't quite manage and the French/American makes can only dream of (Ford have only just managed to squeeze as much power out of a 2L diesel unit as BMW and VAG have been doing a long while).
There's no way my wife would get behind the wheel of a 3 series, it's just too big for her. If she was never going to drive my car and I wanted a motorway miler, i'd have a 335D X-drive with big discount.