I think he meant more of a S50/52 (the US E36 M3) engine, rather than the S14. If you are going to go M engine, go S38.
Although, it would be sweet if someone shoehorned in a S62 running off a Motec system. 400hp, 400tw, light V8... it would probably rip the car in twain!
Now that I'm thinking about V8 swaps, a LS1 would probably be a good choice. Both would certainly ruin the driving characteristics, though. Throw the weight balance completely off.