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sorry, but no way.. an e36 M3 is on par with RS Americas/964s and such, as far as power. An e46 is much quicker than an e36 M. Chalk this one up to you being a better driver than the kid driving his dad's car.. 
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I had an '88 3.2 and stoplight dragged an E36 a couple of times up well into 4th gear. It was very close both times at 1 and 1. E46? No way unless your car is more modified than you said.