Having owned both, and currently owning a 328i BMW, I'd take the BMW over the Merc.
Better handling in the BMW, Parts are Cheaper due to the fact there is a bigger aftermarket support, Easier to work on.
BMW's
ARE the ultimate driving machine, any haters out there probably haven't even driven one, You can put a ton of mileage on them with no issues, better resale value, and they are amazing to drive.
Word of caution: They are maintenance princesses, And if you are not handy with a wrench, you will be paying BIG TIME. I love my garage time (Read Man Cave) and fiddling with the BMW is a great way to spend a few hours. If your the type that doesn't even know how to change the oil, stay away. or have deep pockets, Also don't take the car to the dealer for service find yourself a good mechanic that knows German cars.
Word of caution 2: Don't buy your parts from BMW, you will get raped, as stated earlier there are plenty of after market choices
www.bavauto.com for one.
Word of caution 3: People will hate you. Nobody likes BMW Drivers, you'll get the finger, and all the kids in there honda's will want to race.
Word of caution 4: You will get speeding tickets, The faster you go in a BMW the smoother the ride, the Car feels better at 140 km/h than it does at 90km/h (and thats only the differance of a few mm on the pedal)
Final word of caution your girlfriend/wife/lover/friends will all want a BMW after driving yours, My G/F now owns a 325XI, my brother in law ownes an M3 (He had to do me up one)