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I personally think they will use a modified version of the N55. However there has been mention of a high revving 4 cylinder turbo. Might as well buy a Subaru STi if that is the case!!
I would only be seriously tempted to upgrade from a 'ordinary' N54 135i if they offered the high-revving V8 from the M3. They really need to put this engine in a more compact car imho. The new 201x M3 will eventually get an even more powerful engine (to distance itself from the M1) so this could work.
Eitherway, the engine in the M1 has to be deserving of 'M' status; ie: it has to have balls and its own unique 'M' character....and make all the right sounds!
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