I'd do some searching on
http://www.bimmerforums.com/forum/
We've had our 99 323i since 2001. It's the first year of the e46 model. It's had some problems with front suspension bushings and brake disks. The AC compressor started causing and ignition misfire?? and had to be replaced. Over all it's been a good a car. A 98 might be more reliable since it's the last year but I'd still rather have the newer model.
I assume you'll get the manual tranny. I have heard of problems with the auto.
The small engine has plenty of power for daily driving and it gets better than advertised mileage. The 2.5 six gets better mileage than our old 4 cylinder Accord.