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I6 all day. 1, I personally think engine swaps are for project cars, not your one and only car. And 2, I6 is a unique and wonderful engine, whereas LSs are available in all sorts of things.

My vote is, keep the car as is and freshen it up/tasteful mods. If you want a V8/something else, go buy a V8/something else.
x2. I drove an E46 330ci about 15 years ago and remember thinking how perfectly balanced the car was. Either keep it as is, or sell it for a muscle car. The non-M E46 has been getting lots of love lately on auctions, especially if it's in good shape like this one seems to be.
 
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