If you can get the M engine swap, Do it.
There's a lot of parts on the M that arn't on the regular E36's... bushings, drivelines, engine components, interior components, exterior body styling, etc etc etc. I'm not sure what you mean by M spec...
Yes, I think you can use the M LSD diff's in a regular ol E36 without any major drivetrain components. (like a new driveshaft) (I THINK... Not entirely positive) Make sure to get a good ratio or your shifting might be all weird + other complications. (EX: city traffic)
Transmission mounts are all kinda different, so I've heard... shouldn't be too big of a job since it's been done a lot before. (you may need to upgrade engine\transmission mounts anways to handle the extra power)
I hear lots of talk about remus exhausts for E36's on this board, lots of people like the noise it makes, others don't. There are some more good brands that I forget and I'm sure other people will mention.
It's pritty difficult to get much more power out of almost any recent BMW engine without really digging deep into it, BMW's come fairly well tuned already as I'm sure you know. Kinda good, and kinda sucky if you know what I mean