Not gonna happen for a couple of reasons.
1) the name M1 belongs to the legendary M1, the first M car I believe. It was gorgeous, looked like a Ferrari (I believe the designer actually came from either ferrari or Lambo) and was top of the line, exclusive, pricey... the exact opposite of what an M based off the M series would be (entry level, cheap, affordable, ubiquitous).
2) BMW already went very M with the 135: it comes standard with M cosmetic treatments and has an optional LSD in the accessories department.
If anything, BMW will release the tii concept instead of an M1, but its uncertain whether or not that will actually happen. My theory is that BMW will offer all of the goodies of the tii as accessories for the 135 sooner or later.
Here's the M1:
http://en.wikipedia.org/wiki/BMW_M1