You CAN get decent B5 S4's for 5grand and they are very capable cars.
The 4wd should make it pretty quick on track, with the only downside being that you cant get the tail out fun you can have in a RWD car like an M3. Tail out fun doesnt make for a fast track car though, so it shouldnt be an issue!
The B5 S4 is a far more modern car than the E36, and this can be seen by sitting in one quite clearly. E36 was released in 91 and phased out in 97, whereas the B5 was released in 95 and not replaced until 2001. They are also much better in terms of rust. A mate of mine has recently purchased a E36 M3, and he went thru a LOT of cars which were apparently in good nick, but on inspection were rotten. B5's are fully galvanised and the only places i've seen rust are on the front wings, usually from stone chip damage, and on the bootlid where a bit of trim rubs against it.
The B5 suspension is a pretty advanced multilink affair compared with the M3's mac-struts, and they weigh a comparable amount to the M3 too
I personally dont like the revvy nature of the M3 engine either. Theres no real punch from it, as with any engine making silly bhp/litre, whereas the S4 lump being turbocharged gives you a nice wall of torque much lower in the revs, and is much easier to tune.
Having been in both cars, i personally prefer the S4, although it does need a chip to get it upto M3 Evo power levels
