http://www.flat6innovations.com/cylinderfailures/slides/996_34_004.JPG
http://www.lnengineering.com/986_25_cylinderfailure_001.jpg
They have numerous issues:
Rear main crankshft (to clutch housing) seal failure, due to two things, one is the seal itself which porsche updated, this seal can be fitted to older cars such as the 99's. The other is the crankshaft is not machined concentric enough, so it wears the RMS very quickly, updating the seal does not really fix this problem. Porsche techs have an insertion tool which is basically a go/no-go to assess if the crank is bad.
Slipping liners: Porsche saved money on the M96 engine by casting the high silicon content liner as a piece and then press fitting it into the main aluminum block, the problem can be if this liner comes loose for various reasons, I'm not sure of the specifics. However it drops down until it gets caught by the bottom oil ring on the piston and then pulled down with the piston assembly with great force. The engine is screwed if this happens.
Ovalization of liners: They started making these new engine blocks for the 2.5 boxster back in 96/97, when they got to 1999 and the 3.4 carrera they used the same engine casting and bored it out, inserting the liners just like before. However because the aluminum wall around the liner was thinner it began to experience stretching or movement, I believe its a combination of cold/hot cycles and pressure/stress. The inner liner being made of a high silicon aluminum cannot withstand this creep and cracks along the cylinder wall starting at the top. I have no idea how porsche has fixed this problem, perhaps they just increase the cast wall thickness on the blocks? however aftermarket companies have designed rings that press-fit on the top of the cylinders to support them and stop them ovalizing, if it is caught soon enough even cylinders out of shape can be formed back into shape. If it is not caught then eventually a chunk of the cylinder wall breaks away, called a "D" chunk.
It seems that ALL carrera 3.4 of this vintage have this problem and they all show it at between 50-70k miles. Again I don't know when/how porsche addressed this issue.
So now you see why these cars are cheaper than they should be! if you really want one, try and find one that has had a porsche replacement engine or perhaps that has had an engine teardown and had these issues fixed.