I have a 2002 m3 and a 2003 m3, both have a driveline clunk. The 2002 has 46000 miles, and the 2003 has 33000 miles. If going from reverse to forward gear, you notice it more. If going down the road at slower speed and tapping on the throttle, you hear & feel the clunk. It seems to be somewhere in the middle of the car. Both cars are nice condition and have not been tracked.Everything about these e46 cars id great, except for this and the way the doors open and close poorly, and the "clunk" in the driveline. Any ideas out there ??

 

Take a look at M3forum. Mine's an '01 and does the same thing. It's normal and often referred to as the "M Clunk". I honestly can't say I have come across the technical answer for it though. When I first bought my car I freaked out thinking something was wrong, but I soon learned this car has some noisy gremlins that are normal.

 

I had E46 M3. it's totally normal. it's at the differential and they didn't sound proof it like a Lexus.