| Proud owner of an '01' M5 here. I was also facing the same situation of family needs vs daddy's need for a toy. My children were 6 and 9 when I made my purchase.
For me, reality dictated that a 4 door was what was needed. Perhaps you don't transport the kids very often, or you'd use a different car at those time. I found car seats, kids and their gear make for a difficult situation in any 2 door. As you kids grow bigger, the small back seat of an M3 just won't work for anything other than short distances.
Take both for an extended drive before you decide. Bring the kids, car seats, etc for at least the M3 drive to understand the cramped quarters with your family in the car.
My brother has a '99' M3 conv and his wife a '96' M3 coupe. M3's and M5's are very different cars, but are on the same performace level. Keep thinking about what you want from the car from a utilitarian standpoint. The M3 won't seem as fun if it makes things in your life more difficult than they needed to be. Also, the M5's are a little more subtle in their appearance(a wolf in sheeps clothing/less law enforcement attention).
Good luck with your decision and search. | 
