The 2.5-liter engine doesn't develop the urgent thrust of the 2.8-liter. But there's plenty of power here. Power delivery is smooth and linear with no significant dead spots or rushes of power, just strong, gradual propulsion. It's so smooth, that it's easy to rev past the redline to where the rev limiter cuts back on the throttle. BMW's new Double VANOS variable-valve timing helps both engines provide plenty of torque -- the power that makes a car jump when you hit the gas -- throughout the rev range. BMW 323i accelerates from 0 to 60 mph in about 7.1 seconds.

For a real kick in the pants, the 2.8-liter engine delivers more gusto at the top of the rev range, yet is surprisingly strong at lower engine speeds. BMW 328i hits 60 mph from a stop in about 6.6 seconds, making it one quick sedan.

Changing gears with the 5-speed manual is a smooth, satisfying operation. The shifter uses longer throws than a sports car, but it's a precise movement befitting a world-class sports sedan.

At highway speeds, the 323i is extremely stable. I found it extremely difficult to obey the 55-mph limit around Washington's Capitol Beltway and impossible to stay within the law on Maryland's back roads. The suspension is tight, feeling like fine machinery. BMW's 323i isn't as quiet nor does it ride as smoothly as the best luxury sedans from Japan, but it isn't intended to be. Instead, the BMW 3 Series cars put the driver in touch with the road. You hear and feel what's going on, though the outside world is muted well enough to ensure comfort. It's a balance that BMW masters. The stiff chassis structure allows the suspension to dampen irritating road vibration, reducing the chance of squeaks and rattles.

Steering response is more like that of a sports car than a luxury sedan. There's little play in the steering and the feeling is one of directness. This car goes exactly where you point it. Unlike the over-boosted power steering found on many other luxury sedans, the BMW's steering provides feedback and you can feel the road. This car handles curves with aplomb gripping through aggressive cornering maneuvers. When the tires finally let go, it's fairly easy to control, though it requires a bit more skill than a front-wheel-drive car.

Brakes are even more important to going fast than horsepower and the 3 Series provides excellent stopping power. On a twisting, bumpy, gnarly road that's familiar, I slammed on the brakes both in a straight line and while turning, the latter a real no-no. The 323i brought me to a quick, uneventful stop. The anti-lock braking system was hardly needed on the dry pavement because the tires offer good grip and the suspension does its job, keeping the car stable and minimizing nosedive so that the rear tires can contribute. As a result, this car stops very quickly and it's easy to control in a panic braking situation.

While front-wheel drive has its merits, pure racecars use rear-wheel drive. Enthusiasts prefer rear-wheel drive because they can actually steer the car with throttle inputs. The payback for this added element of control can be a skittish rear end, particularly on slick surfaces, a condition known as oversteer.

For 2000, BMW has replaced its standard traction control system with Dynamic Stability Control on all 3 Series models. BMW positions this technology for its safety benefits: DSC helps stabilize the vehicle in severe cornering maneuvers by judiciously applying the brakes to individual wheels. In other words, it helps the driver maintain control when the tires lose grip. This can save your life by helping you keep the car on the road; just remember to point the steering wheel in the direction you want to go. But DSC also enhances handling on winding roads, smoothing out minor errors, making adjustments when you hit a patch of sand in the middle of a tight corner. One place where the system came in was when I kept my foot to the floor around a tight corner. The rear tires lost grip, the 323i expertly reduced throttle, applied a little braking force to one of the front wheels, the chassis took a minor change in its set and off I went again. This is extremely beneficial on a rear-drive car in slippery conditions, but it's also useful on dry pavement. A switch allows the driver to turn DSC off when it isn't wanted, like on a racing circuit.

Other cars in this price range surpass the 328i in significant areas. The Lexus ES 300 is smoother and far quieter, the Acura TL provides more equipment for less cash, and the Audi A4 offers the all-season advantages of all-wheel drive. But with this latest-generation 3 Series, BMW has closed the gap where it previously fell short. So while this is a true sports sedan, the 3 Series gives up little to the aforementioned highly refined near-luxury cars.