I think about this all the time, too. I was recently on track with a guy who was driving an E36 M3 that he had converted to a track car. He managed to strip 400+ lbs of weight out of it, upgraded the suspension, bushings, mounts, steering rack, etc., and with an engine chip, upgraded intake and race exhaust now makes around 270hp. So he's just as fast as I am, but has the benefit of a half-cage, race seat and harness, and he isn't beating on his daily driver.
I don't have the luxury of space or $ to get a nice tow vehicle and decent trailer--that's part of what's holding me back. But you seem to have the correct elements in place--you should do it. The car in Los Altos seems like the better one, and it's a bit cheaper!
An E92 M3 in several years could possibly make a very desirable track car--imagine our cars, with that screaming V8, stripped of several hundred pounds and with upgraded suspension/mounts/bushings and a full cage/seat/harness.
