The only experience I have with M cars is riding in my buddy's E60 M5 so my experience is limited. Perhaps I'm missing something here but why must M cars only be track ready coupes and sedans? Is it out of tradition? Even the Z4M is getting scrapped.
The auto industry is continually evolving and the hottest car segment right now are small/mid-sized crossovers. BMW claims to build "the ultimate driving machine" but doesn't have any plans to build a X3M even though Audi is building an S version of the Q5 and Porsche is building the Cajun which you better believe will perform fantastically as a poor performing Porsche is probably more of a hearsay than a diluted M line up. I believe MB is right in their decision to offer AMG versions on almost all of their cars as they probably understand that most people who buy high performance AMG, M, or RS models aren't tracking the cars, they're driving it around town or to the office and home.
To the individual who says there's no market for a X3M I'd have to disagree, provide the auto market with a high performance small crossover with xDrive so you get great performance rain or shine, and the brand image that BMW conveys and it'll be a hit. Plus if BMW stays true to their motto by building the ultimate driving machine they'll just take the money from the increase in sales and invest it to the rest of the line up.