I own a 03 M3 SMG Coupe. My previous car was a 97 M3. I do not have experience with the 996 but can offer the follwing comments on 03 M3.
Maximum acceleration: Very fast. As fast as a 996 from what I have read. Not a lot of torque at low/medium RPM.
Handling: Great handling but you do not get much steering feel.
Seats: The seats do not hold me well in place. My shoulders are not stable. May be the width adjustable seats would sove this problem.
SMG: All I can say is that I find it fantastic. Way better than any 6 speed. On the Roadfly E46 M3 forum all SMG owmners love it. Certainly a big plus over the 996
Confort: Except for the seats which are average, I am amazed at how confortable my car is.
Luxury: The E46 feels very modern and luxurious. My cinnamon interior is absolutely gorgeous. Most people on the Roadfly board feel the M3 interior is much nicer than the 996.
I did not consider the 996 because I find the Carrera 2 styling to lack character while being much higher priced than the M3. The 4S is beautifull but it is just too expensive.
I suggest you visit the Roadfly E46 M3 forum at:
http://bimmer.roadfly.org/bmw/forums/e46m3/
These are just my opinions, others might think differently.