You can make a 2.5L E46 handle well,
and look pretty - but not fast by any means.
Coilovers, wheels, 3.38 diff (assuming its manual). Those are your best bets to get the most out of it without spending more than what the car is worth.
'02 ///M5 Imola Red / Imola Red '09 335i Alpine White / Coral Red