How can the E36 M3 not be considered a real sports car when it was deemed "The World's Best Handling Car" time and time again by more than one magazine...notable ones too, like C&D and MT. I remember that in at least one of the tests it beat, amongst other cars, a Ferrari F355 and a Viper. As far as a car being a sports car or not, I would put just as much if not more weight on handling as outright power. The Miata has next to no power and no one says it's not a sports car! I know no one said it, but I hope no one is implying that a 190 2.3-16 is a "real sports car"!!
Also, if you are interested in an M3 and are wanting to do mods, go for a 95 because that was the last year of OBD I and you can do ten times more to a 95 than a 96. If you want to mod one check out www.activeautowerke.com.
If you don't want to mod one, get a later model with the 3.2 (95 was a 3.0). Although they had the same HP (240), I think the 3.2 was a little torquier and a little easier going if I remember correctly. Let us know what you end up doing!