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I've had both cars, albeit I only drove the M3 in real winter conditions. I picked up my S5 towards the tail end of winter with a dusting of snow on the ground. From my POV, the M3 handles well enough in the winter with proper winter tires of course. There were times last year when the back end was giving out significantly in a good amount of snow - manageable but you have to work extra hard to control. I ended up garaging it after a month or so.
If given the chance to choose again, I'd take the S5 as an all year round vehicle - it's got the looks, interior, performance (not an M3 but still better than most cars out there) and it gives you the comfort of being AWD. The S4 as well is just as good - with 2 extra doors!.
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