I am indebted to Pelican for facilitating the exchange of this much wisdom. In the name of budget diligence, I am considering selling my 3.2 and melding my driving pleasure and transportation needs into one vehicle with Manual transmission. Must be a 4 door saloon (company policy). While I will need to test drive a few more, I believe the 530i would leave me wanting for acceleration and handling. I have widdled down to the 2002-2003 model years and have the luxury of time to find the right one.

Is the 540i the happy medium between high performance (M5) and Practicality (530i)? Knowing that nothing can replace the connective driving experience of my 3.2, will the 540i fill that need just as much as the M5? I prioritize handling much higher than sheer horsepower. Thanks again for helping me narrow the search and avoid unnecessary mechanical pitfalls.

The M5 has about 90 hp more than the 540. Makes a difference.

Good post by L8Brakr. The M car might not cost you more, but the potential is there. Any parts exclusive to the M5 will be substantially more expensive than a standard BMW.

I would say that you need to drive a 540i to compare. I've driven two E39 M5s and came away somewhat underwhelmed with the power, I actually felt that my X308 XJR was a quicker car. A 540i with the M-sport package will have much of the handling and braking of the M5 without the potential M-tax, but you will definitely be down on HP.

Other similar cars worth considering:

XJR - auto only, the 2004+ have a problematic air suspension. The X308 cars are quite reliable, I had one and loved it.
S8 - I had a 2002, one of the best cars that I have ever owned. Auto only, which is why I sold it.
E55 - for the money you could get a mint W210 with cash to spare, or a supercharged W211 with a few miles on it. Auto only.
CTS-V - good option if you can find one that hasn't been hot rodded. Basically a Z06 sedan. 6-speed manual only.
RS6 - might be pushing your price range, auto only.
S4 - slightly different HP league than the others, but $18k buys a lot of S4. Stick or auto.
S6 - who doesn't love a hot rod wagon? Auto only.

Lots of great cars in this segment, sadly most are auto only. I don't know about you, but that kills it for me.

Go the e39 530i and VF Charge it.

VF Engineering Supercharger kit for BMW E39 525i &530i 5 series sedan and touring Supercharger System

Best way to narrow that HP gap with a 540I is install the early large runner intake manifold, Dinan throttle body and have the DME reprogrammed........................which is exactly what I did to mine. Net gains are 35+ HP / 25 Tq. flywheel :)

This is a great post - and I would emphasize the CTS-V and S4 options (though it's worth noting that S4's are a bit small in comparison to the others). Why are you not considering any 3 series sedans?

I looked at the 1st generation Caddy CTS-V and was put off by the build quality, and frequent tendency for rear wheel hop and axle / diff breakage when pushing it hard. The 2nd generation has better build quality and GM has addressed the rear diff and wheel hop issues but is pricey.

When I can get a 2nd gen CTS-V wagon for $20k, I will be all over it.

I had the exact same thoughts. I came close to buying an e90 M3 and selling both my e36 and 911SC. But, then I regained my senses (with some help from my wife) and I realized that I had the best of both worlds. I have an efficient M3 for the daily commute battles and an old Porsche for the sheer pleasure of driving on weekends and such. Similar to an M5, the e90 M3 consumes gasoline like it's 1955. Besides you have a car that is appreciating at a rapid rate. Ten years from now it might be worth more than double what you paid for it. How awesome is that?

Do you need a 5 series? I had a Dinan 540i and it was fun to drive, but the handling wasn't that great. It was a big car and it felt/drove like one. My daily driver after that was an E46 325i. It handled well and was a lot more fun to drive, despite the lower hp. If you don't need the space of a 5 series, I would suggest an E46 330i ZHP. I've driven a few of them and they are a blast to drive!

I wouldn't even consider selling my 911 to go back to ANY E39, including an M5. I truly believe I was meant to own/drive my SC. If I had to have a 4 door work car, I would look for something cheap to buy, own, and maintain with a stick.

To sell an appreciating asset like an A/C 911 for a quickly depreciating, costly to maintain asset like an E39 M5 isn't wise.

That^^^.