The 323 is a 2.5 straight six called the M52b25. They were available in 1998-99, and possibly 1997. It is basically the same as a 328, but with a slightly shorter stroke, giving it the .3 L less displacement. Since the 2.5 has a shorter stroke, it revs faster than the 2.8, and thus is a pretty snappy engine. BMW gave the 323 a REALLY restrictive exhaust to lower the hp, so the 2.5 would be less of a competitor to the 328. Change the midsection and catback, and you get all that power back.
As far as the chassis goes, it's the same as the 328. Suspension components, body panels, etc... are all the same.
Basically the 323 is a 328 with a very small difference in power. With the midsection/exhaust changed out, and some software you'll be right in the 2.8 territory. You'll also be paying slightly lower insurance.
If it was me, I would only be concerned with the condition of the car, and the options it had. The size of the engine wouldn't be my main concern, especially with S52's going so cheap theses days.
Anyway, if you end up with the 323 shoot me a PM. I've got a Dinan stage 3 ECU for a 323 kicking around.