The e36 323's M52B25 is great in the sense that you can (realistically/relatively cheaply) mod it to get more power than an M50B25 or even an M54B25. Funkyseefunkydoo got 207 bhp dyno'd from just an m50 manifold and 328 exhaust, not to mention with an aluminium block it's much lighter than the m50b25. The 2.93 ratio diff is annoying, but swap it for a medium case 3.15 from a 325 or 3.0 M3 a large case 3.23 from an M3 Evo or even a small case 3.45 from an iS or 320 and you will be flying. Non LSDs are very cheap and widely available if the ratio is all that matters.

I would certainly recommend one, I would be a bit biased though trying to think of a replacement is very difficult unless you're going for an M. Even a 330 e46 doesn't seem like a worthwhile upgrade in the sense that there is a noticeable difference in tax but not a massive difference in performance, not when you think a 3.0L M3 is the same tax anyway...

Best of luck anyway anything I can help with shoot me a pm!