BMW M3 (stock) can easily run 4.8 seconds 0-60 and about 13.3 at 105.6 mph. And if you ever drive a M3 with SMG, you will understand that no automatic tranny will ever match SMG's superfast (but violent) shifts (80 ms) and launch control. Let's talk stock vs. stock. The gear ratios on the tranny (either 6-speed manual or SMG) are much more aggressive than Lexus auto. This is why M3 has been quite competitive with stronger competitors. The fact that M3 also has a true LSD in the rear also helps with taking off. If you talk about mods, then M3 will pull even further...and we're only talking straight line acceleration. M3 now has two companies making superchargers if you want to spend more $$. Apples to oranges in any performance category...M3 will beat IS350 over and over again anyday in any performance category. This is expected because of M3's aim and expensive cost (over $10K difference). So, it's no insult to IS350, but you should NOT compare the two at all.
There is a guy on M3forum.net (Matthew) who consistently ran his M3 under 13 in the 1/4 mile. He is a professional driver and took some stuff out of the M3 to decrease weight.
And, like i keep on telling you, there is more than acceleration that makes up a sports car. Therefore, you will not see BMW M division caring very much about Lexus IS350. The next M3 will have a V8 because of the competition in it's elite class (listed above), NOT because of IS350. If you want to talk about engineering prowess of IS350's engine, then please remember that M3 engine makes 333/262 power with only a 3.2L displacement. So, i doubt that BMW M division would have much trouble making more power than IS's engine with a 3.5L displacement.
Again, you're comparing apples to oranges. You cannot just focus on one thing and claim that it's a close competitor. I agree with you 100% that IS350 is more desirable than BMW 330i for me. However, with the new 335i, Lexus has a more formidable competitor in terms of raw power.
Do you have the Nurinberg's time for either BMW 330i or IS350?? This should give you an idea whether BMW's handling prowess can make up for it's lack of straight line acceleration.