The question you need to ask yourself is if is the same one I did.
It's if you want a BMW or not. If you like BMWs look, feel and the way they drive, as I'm sure you all do, and want AWD then a 325xi or 330xi is your only non-SUV option.
Now, the G35 is certainly a hot car... not to mention fast. I've never driven one so my advice is the same as everyone elses... go test drive it.
When I was getting my car I decided that I wanted something that handled well, looked hot and was AWD. It didn't have to be overly fast so I was considering the 325xi and the A4 1.8T Quattro. The 325xi was certainly an AWD car, but it was very much a BMW too. It feels solid, responsive, communicative and connected with the road. The Audi had this too, but to a much lesser extent... hence my choice.
As for the E46's AWD system, it's certainly not even CLOSE to the most advanced system out there. The Audi's, the X-Drive and the G35 are much more advanced systems. The E30's is not more advanced... it's actually a lot more BASIC. The E30's was much more performance oriented, however. The E30 allocated power to all four wheels evenly. The E46 system uses DSC data to control power to the wheels. The E30 was much better in a race. The E46 system is more traction oriented than performance oriented. However you can still have a lot of fun with the E46 system. On a good launch, with DSC off, I can EASILY spin all four wheels for a split second before the car snaps your head back and rips off the line. Of course, the AWD power loss allows whoever you're racing to fly by you in a matter of seconds.
As for the ride height, I agree. It's overly excessive. Look at my sig for proof. Of course it's nothing a nice set of springs won't fix. I'll be installing the Dinan Stg 2 suspension soon since I'm extending my warrenty (I was in a mild accident recently so I'm anticipating some problems down the road) and I want to keep my warrenty on the suspension.
Good luck with your decision! Let us know what is picked.