I dunno, MB quality may be going down, but has yet to drop to BMW levels
I think it's pretty much accepted fact that the BMW's are tuned more toward the performance aspect of driving, while MB's are tuned more to refined Luxury. On that level it's really a matter of personal preference. The new 7 is a joy to drive, however I have seen so many problems on them, especially with the dash lighting, and all of the electronics aboard, that I cant bring myself to consider one.
I feel MB's are built more solidly, especially in they years that we have been discussing.
Granted I too stated that the motor problem has been adressed by now, but there is also the question of if it was replaced with the same, or a newer version of the block, as pointed out by other people.
As far as badge engineering, The original post reffered to a 1991 740i, I was just pointing out that there was no such beast, unless someone got creative.
I still remember in 90 or 91 the local BMW dealer had a 89 535i with the 750il V12 in it. Seems a customer had encountered a severe rear impact, but the motor was intact, so they translplanted the 12 into the 5, it was sort of a show piece for them. Had it badged as a 550i.
Generally speaking though, having seen about 20 MB's as they age (ie for extended periods of time), and aproximately 10 BMW's, at least until the mid to late 90's the MB's held up better by far. Just my .02 of a dollar.
As far as the driving characteristics, BMW's are a delight to drive, as are MB's imho. Now, the cars are fundamentally different in their scope, so it's all up to what you prefer.
Personally I would love an E36 M3 as a toy for the weekend, but would never drive it daily. Maybe someday when I can afford toy cars....
Best wishes and take care,