I'd say get down to a dealer and try a 318i/d. You'll be spending a lot of time with the car so make sure you try the different options.
Certainly the diesel ticks the fuel economy button, but is also gives significantly more mid-range punch. In normal driving it's going to feel quicker. It was some years ago now, but the diff between the 2litre petol and diesel E46 when I was looking was chalk and cheese - the diesel blew the petrol into the weeds.
I'd second Viv on the Xenon's... once you've had them you'll never want to go back. Drive a car with halogens and it's like going back to the darkages.
At the risk of inviting all sorts of argument and abuse, I'd also say that you might even want to look at the SE. You can throw in sports seats, steering wheel and suspension for less than the Sport cost if you want them. It all depends if you want the styling mods or some more toys.