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I traded in my '05 M3 w/SMG for the 135i.
As others have noted, the suspension is softer, so it's more livable in day-to-day driving. But it's not quite as composed over the bumps. In particular, the rebound damping seems a bit soft. The 135i is more eager to turn-in and rotate around than the M3, though, due mostly to its shortened wheelbase, IMO.
As for the engine, I haven't really let the engine run to redline yet, as I've only had it for about 200 miles. But yes, the torque comes on earlier, but the motor doesn't seem *quite* as eager to rev as the S54. Plus, there's less engine noise in the cabin of the 135i than the M3. This is a plus some days, a minus others.
The 135i seems a bit undertired, especially in the front, but that was the case with the E46 M3 also. Going up to 225/255 should help matters in that department.
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