The new M3, (set to go on sale in Australia late 2007 early 2008) will be powered by a 300kW+ (420hp) V8 engine with peak torque of 400Nm.
Since BMW are one of the innovators of engine technology, designing a powerful V8 engine wasn't going to be a simple job of giving it a little more capacity and hoping for the best.
The new V8 is only a 4.0L but it is derived from the all powerful 5.0L V10 engine used in the larger M5 and M6. The reason I have so much respect for the BMW engines is simple, you can rev this new V8 to 8,400rpm and it will still want more, try that in you brand new HSV and you'll find out how long you'll have to wait for the tow truck.
Of course, this is no Honda engine, so you won't have to rev the guts out of it to get the power down. BMW claims that 85% of all this power will come from just 2,000rpm. The new M3 will do the 0-100km/hr dash in 4.4 seconds, with a top speed (electronically limited) of 260km/hr.
Expect to see the coupe model first, than the convertible and sedan.
A Dyno Graph of the BMW M3 Engine:
More details on the 2007 BMW M3 here