I've owned my 318 IS for 7 years and done 40,000 miles in it. I bought it because I wanted a rear wheel drive sports car and didn't want to spent too much money. It's got a very modern engine in it - a 16 valve 1.8 which knocks out over 130 hp - so it's pretty quick and gets over 40 mpg on a run. It's also surprising roomy inside and practical (considering it looks small and old fashioned). We did use it as our only car for a while and it was fine (2 kids at the time). The quality of engineering on these older BMWs is great too - mechanics love to work on them.
The car handles very well, has good balance and there's disk brakes all round. The steering rack is a little slow compared to modern cars; some people update the steering rack with one from a Z3. The standard 14" BBS alloys look old fashioned, so most go for the optional 15" ones. However, you can go up to 17" if you want to. There's an excellent online forum at E30ZONE. The engines are very robust and will go to 200,000 miles if you look after them. There's no cambelt to worry about, as it uses a cam chain.
The best thing about these cars though is they don't depreciate. A nice one will hold it's value as long as you look after it. The main danger is rust to the shell, so watch out for that - particularly the rear arches. And I also think they are a cool car! I have used mine to visit clients when doing consulting projects and the image is fine. Kind of sports classic car type of thing.
It's now 2012 and I've replaced the IS with an E36 M3. The main reason for this was to get a car with a limited slip diff. There are some ISs with LSDs as it was an option when new, but mine didn't have one. You can buy one, but they are expensive and the 325 sport ones are not the correct gearing. I sold the car for £1000, which was £300 less than I paid for it. That's £300 depreciation in 7 years. I could have got my money back if I'd been more patient. This shows what great value these cars are because most cars depreciate at between £1000-2000 PER YEAR.