I think they just appeal to different mind sets. The e46 the most hardcore feeling NA M3, and the e9X is the softest.
-Stock, the e46 is the harshest riding M3, whereas the e9X is the softest (or maybe e30...).
-The e46 drivetrain clunks, while the e9Xs doesn't.
-The s54 is unable to maintain a steady idle, s65 can.
The S54 sounds like it wants to explode at 8000rpm, whereas the S65 feels unstressed at 8400rpm.
The S54 has the highest specific output and highest piston speed of any NA BMW engine.
The e46 is smaller, and it feels way smaller from behind the wheel.
The e46 is 200-400 lbs lighter, depending on how the cars are optioned
None of those are bad for the e9X (other than weight), but they are different-- so I wouldn't expect people that like the e9X's experience to be enamored with the e46 experience. But, if you like the e46 experience, the e9X isn't a better version of it-- so that's why you get people preferring the e46 to the e9X.
Since people keep saying they're the same weight, and I weight all interesting cars that come to my house (and some that aren't)...
Note: All weights are adjusted to the car having the equivalent of a half tank of gas.
But, looking at that we have to very comparable cars-- a slick top, no idrive, 6mt, 18" wheel e90 M3 (3638 lbs) and slitktop, no nav, 6mt, 18" wheel e46 (3335 lbs)-- so 305 lbs different, similarly (lightly) optioned.
Oh, and a final throught reading through the thread-- a faster steering rack isn't "better"-- it's a different compromise. If you prefer a faster rack, it's better for your taste, but there isn't an objective better here. If there was, why not have it go lock to lock in, say, a 1/4 turn of the wheel? :P
I find the e90 M3 to be more of a successor to the e39 M5 than the e46 m3. They are more similar in size, more similar in weight, they have more similar suspension geometry that people like to claim is an upgrade to the e46 (different geometry's a suited to different size/weight cars-- BMW actually wrote a technical document about this), similar ride quality, similar sound deadening, and similar V8 sounds (albeit the S62 is torquey and the S65 is revvy). Similar chassis stiffness, too! When I think about replacing my e39 M5 with an e90 M3, I can get enthused! It's a more hard core, lighter, sportier, revvier version of a similar concept. I have zero desire to replace my e46 with an e9X M.
... sadly that's a non starter, as my wife loves the M5 too much.
As these cars get older, the ability to be DDed matters less, absolute speed matters less (because they're both slow as shit compared to modern cars), and looks and driving experience matters more... and those last two are where the e46 excels. That, IMO, is why we're seeing the things happening with e46 values that we are.