You are an old man in a young body!

.
Everyone says that to me...
i'll opt for smoothness in 10 years time (maybe)...but V8's are just too dirty... the sound, the grumble, the grunt, the instant swelling of torque that holds you in your seat til you let go... just too addictive
Its not just the smoothness, its the way that engine just sings, as you rev it, the directness of the throttle response, the linear shove of power. Its just a brilliant engine. I've driven Vins 330i and my own X5 with that engine, and its simply brilliant. The noise is epic, tuneful and melodic in a way a V8 is just corse and gruff.
The complete lack of vibration from that engine gives the car a wonderful feeling.
And yes it is apples and pears, but the E39 is definitely one of the best BMW's ever made (if not the best), and the W203 is one of the worst cars (with the W210) that mercedes has ever made. Facelift W203 is a different story on saying that though.
I'd say the 203 is not MBs finest hour and if the 210 and 203 are the worst offerings they've done well. I've driven a members C270cdi when they had it and the ride/handling balance was nice, the steering faithful and the seating good. However a £5k C32 could well be a bit ropey, a £5k E39 pretty mint. A 202 C43 or a mint C36amg might be a other choice?
The 203 a good base for a car having spawned the CLK (and all the AMGS right up to Maffs CLK DTM). I would say a C32amg will be nice, but it wont be as smooth as the 5er nor as spacious.
There is the small matter of budget but I think in this case their money is better spent on the 530i but maybe thats more a reflection of my tastes over theirs.