To address some of the issues raised so far in this important thread:
1. Warranty will definitely not cover this. You will need a new motor and install and will need to pay out of pocket. Period.
2. Do not try to commit fraud. Fraud on this amount of money is just plain stupid. Can you see yourself digging yourself into a deeper and deeper hole.
3. Adding forced induction on a motor not originally designed for it will increase the risk for failure. Period. Accept the risk if you want to go down that road. There are no shortcuts. If you want to do this right, build the motor, lower the compression, add a larger oil pan, larger oil cooler and larger radiator for proper heat management.
4. Understand the concept that no amount of power will ever be enough. The OP upgraded from 600 to 650hp. Why? Isn't 600hp enough? See how this goes. You body adapts physiologically to the forces put on it, and the car just doesn't seem as fast. People who drive a 150hp car will get into a bone stock M3 and say "holy shit!!!" Even if you owned a 1000hp car, if you drove it enough, it would stop feeling as fast as it did initially.
Has anyone moved "down" to a car with less power? I have. In 2004, I sold my highly modded Audi S4 that had 500lb-ft of torque and bought a 350Z. For about the first month it felt slow. After that, it started to feel fast again to my brain. My body and brain actually "de-adapted" from the faster car.
A stock M3 does 0-60 in the low to mid 4's. On an absolute level, this is fast. This was supercar speed not too long ago. The engine in NA form is a masterpiece IMO. Enjoy it for what it is. There are some great tweaks that you can do to extract a little more in NA form with little downside. Thats as far as I would go. If you want big power, start with a factory turbo. The next gen M3/4 will do well in this regard. Of course then people will complain that the engine doesn't have the same "character". And it won't.
Audi S6 * Audi S3 * Porsche Cayman GTS
--Former BMW M3 owner