Having driven both in stock trim (I nearly bought an S2 C34 a couple of weeks before the M35's were available) I can tell you that a stock M35 has it all over a stock C34's (barring the 260RS of course).
I left disappointed by the power delivery of the stock S2's that I drove (haven't driven an S1 so can't comment).
The M35's do have a throttle restriction below 3000rpm which can be annoying, but the torque is a massive difference, the VQ25det has heaps of it.
I personally like the more moden look of the M35 (obviously) and they do look a lot better in the flesh than in pics.
Interior is nicer, has more room inside (no rear strut towers), is quieter and has a better 2.5L engine