S2 and S3 are mechanically identical (or near as to make no difference) - but S3 looks much better. Here in the UK, those looks (different front end, necessitating different bumper/splitter, cowl and wings is about £10-13k second hand.
The various cars use different generations of BMW technology in the drivetrain/electronics. S1 uses the 286bhp drivetrain, S2 and S3 use the 333bhp drivetrain (although quite a few seem to put out more power - I think BMW underquoted that engine's power significantly), and S4 uses the 367bhp drivetrain (which conversely seems to have a significant minority putting out a bit less than quoted). S4, in my opinion, has by far the best interior trim, in terms of style and quality.
I run a Series 2 (boshly's old car, in fact), and I love it. It's a high mileage example (50,000 miles), and as such completely sorted, trouble free, and feels very, very well put together (apart from a loose door handle - getting fixed at next service!). I would probably rather have an S3, due to the revised front end - but to drive and sit in, there is absolutely nothing in it.
Only grumble - I really don't like the factory sidepipes. Far too quiet at idle, and odd sounding at higher engine revs. Traditional rear exit sports exhaust would be my preference: more traditional V8 rumble!
