I guess I'll start off with an introduction. I've had a 996 Turbo for almost 6 years until I sold it a few months ago. Since then I've been driving my Volvo to and from work until my girl decided to move down to live with me. Thought it was a great excuse to pick up a M3 and give her the Volvo. Makes sense to me.
With that said, the Turbo will pretty much walk the M3 any day of the week. Even more so on weekends. 996/997 Turbos shouldn't have much of an issue on a stock M3. I wouldn't have worried much until I saw some force induction on the M3. As someone stated the Turbo is decently mod friendly. I don't know about $3000 for a good tune and such but I can reasonably say with about $7000-$8000 you'd go from a 420bhp to about 700bhp. 997 Turbos are generally about the same price figure but will probably bump you closer to 750-800bhp. This is including exhaust, injectors, clutch, K24/18G hybrid turbo, tune. If you wanted you can get bigger IC's.
Someone mentioned it riding too high. I think it was the perfect height for what it was made to do. I never really thought the ride was really that soft. There was a very slight bit of roll on hard cornering but I didn't think much of it. Even during PCA track events. :P A lot of people lowered it, I couldn't due to location and pot holes.