The 320d will handle better, is faster and will be vastly more economical.
It will also be a worse ride and a much harsher engine (like driving a Massey Fergussen after the sweeeet 240).
Interior wise I think the 320 is a bit bland and austere but its well screwed together and a well sorted motor overall.
I take it a C220cdi isn't on the cards?
Having been in both recently, I would say that both are very good cars. The BMW will be more economical, fractionally quicker and will handle better. The Merc is a nicer interior and design and much, much, much more comfortable. If you do go for the BMW, get one without the M sport gubbins as the ride is ridiculously hard - it would be impossible on long journeys.
I'd agree with that. My friend bought a 330d E46 from new & he had the M-sport suspension/wheels option. The ride is actually very good at 80MPH but dreadfull at 20-40. It just continuously jars & bounces about at "normal" speeds.
The 2 litre BMW diesel suffers from turbo problems, quite common for the swirl flap to be sucked into the engine causing serious problems that are expensive to put right. Cousins cost £1900 just to get it back on the road, would have cost £3k to fully repair. If you decide to go for one, check to see that it is removed or take the removal cost into account when buying
BMW 2 litre diesels suffer from problems with their turbochargers, quite common for swirl flaps to get sucked into the engine, an expensive problem to put right. Cousins E46 320d 2002(52) with approx 70k had this problem and it cost £1900 to get it back on the road, however a full repair would have set him back £3k according to his mechanic. If you do decide to go for one check to see that it is removed or take into account the cost of removal when buying.
buy the c220cdi if it comes into the equasion. performance will be similar (bmw slightly better,not worth mentioning hardly though in my experience of e class vs 5 series) bmw will certainly feel better through the bends, however the ride is better in the merc, better interior, better looking even, and only let down by the gearbox if you buy a manual merc! both very good cars, but on balance, the merc would get my money every time!
i compared my e300turbodiesel to my mates 530d bmw. performance was very similar, bmw had much harsher ride, similar fuel consumption, dull interior in the bmw etc. thing that worried me though is that his 530d was the sport model and had common rail diesel technology and wasnt notably quicker or better on fuel than my car and mines the old school diesel not a cdi!!! cdi mercs are meant to be much quicker and more economical so what if id had a 320cdi? who knows? also the bmw was much heavier on the steering! for the record his car is an 04plate which had about 87kmiles on the clock at the time, mines a 1999 reg with 136k miles at the time