Unless you are racing your M3 changing to dot 5 or four will be a waste of time and money. Dot 3 boils at around 400 degrees, dot 4 450ish and dot 5 500.
If your pedal is mushy as soon as you start to drive (cold) it's not a fluid issue, as long as the fluid is fresh and not water laden.
Dot 3and4 absorb water right from the air.
I would start with checking the shoe adjustment on the rear drum. By design the return springs on drum brakes pull the shoes all the way back away from the drum. As the shoes wear it takes more pedal movement to take up the gap between the shoe and drum.
Disk brakes do not retract the pads so as they wear the "gap" is taken up by more fluid in the caliper and the reservoir level goes down.
On the drum adjust the shoes so they drag slightly then pump the pedal and recheck the drag. It may take a few adjustments before it is at its best. This is due to the non symmetrical movement of the shoes against the drum. The shoes have to realign themselves in the drum
A little drag, very slight is fine. As the drum heat up it will expand and grow in diameter.
