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I think the Z's looked great when they first came out... now that they are about 6 years into the model cycle, they will need a pretty big change with the new generation.
The current headlights and taillights are fairly distinctive, and have evolved well over the refreshes (LEDS, projector xenons, etc). I am a little concerned about those new headlights as well, but I will reserve judgement until I see them on the facelifted/next gen car.
The 3.7L engine should help a fair amount. I don't think it's necessarily accurate to say the 370Z needs to upgrade to compete with the 335i. The drag times are about the same, although it seems like there is a little more variability with the Z - but they have posted in the low and mid 13s with similar traps.
As far as the VQ37VHR engine goes, I certainly enjoy it. But I am concerned about how Nissan engineers would be able to extract much more power out of it. The intake and exhaust are already extremely free-flowing. They could tweak the VVEL to deliver more torque, but that would likely be at the expense of fuel economy, which is obviously an increasing concern.
However, the engine is not what I'm most worried about with the 370Z. I agree with many of the other posts here - It's the weight. Nissan needs to somehow reverse the trend of porkier cars like they have with everything else (G sedan, G coupe, altima, etc). If they are able to tweak the suspension and engine, but deliver a fairly lighter car, that would be a winning formula. IMO, that with greatly revised bodywork but keeping similar lines would help the Z continue on for another 6 years.
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