This is a great thread, and would love to see more updates! Looks like the most popular options for the e46 xis are stock, KW V1 Coilovers, Bilstein/Koni + Eibach/H&R combos. Dinan maybe less so.
Personally I would love to lower the car-on-tippy-toes appearance, while increasing road handling yet not sacrificing comfort too much. Living in PA, we get snow and potholes a lot and my 2005 330xi is my daily driver.
Looks like KW V1s are a great choice to have something so adjustable from stock to slam, but at a cost. But they are designed for bad weather like the xi. Sounds like the spring/shock combos may lower at a lesser cost, but would love to see more photos of those along with the details provided. My guess is that you can lower your car somewhat and still keep it comfortable if you don't go too low and don't go with low profile wheels.
The ride height is my main negative with the car, and would love to address that in the future!