I currently own both an RS4 B7 Avant, as well as an E90 M3 manual.
Here are my first impressions from spending a month and ~500mi/800km in an M3 after four years and ~40000mi/65000km of RS4 ownership:
- The M3 has far more configuration options for engine/suspension/steering/traction control compared to the RS4. In their default settings, the M3 felt like it had mechanical issues. The RS4 has just one mode, in which it manages to be both sporty and comfortable (plus an S-mode to make it slightly louder).
- Both cars have stock exhausts. From the cabin, the RS4 has a wider 'vocal range' and makes a generally more exciting engine note, both at high and low RPM.
- Some 'basic' features aren't really available in the M3. Such as oil dipstick, or coolant temp gauge, or instant fuel consumption, or turning iDrive screen off (not setting to black), or manual wiper speed adjustment.
- It feels like an M3 has more cabin space, but ergonomics could be better. I'm 194cm/6'4" and can't shift through gears while having the elbow in the arm rest, nor can engage 5th without leaning forward and detaching my shoulders from the back rest. Also, during track days I bang my helmet against the ceiling handle in every right hander.