What difference does it make? If he had used an M3 Chasis he would have pulled most of the parts anyway. Then again - he has the M3 rear and an M3 motor - thus making it a custom "M3 sedan". How do you suggest we call it? "318 sedan prefacelift M3 parts, M3 motor, awd custom car"?
Besides - there are people who have turned their sedans into M3s. Its not as big a deal as you think. They simply pulled everything from an M3 (front, rear, suspension, brakes, stearing, gearbox, differential, engine (and what not) from an original M3 and bolted those parts onto a modified sedan chasis.
They have even manufactured their own chasis parts (fenders and so on) to give their sedan the same look and wheel clearance an M3 has. Original M3 bumpers, mirros, speedo. No one has a problem if these guys call their ride an M3 sedan...
Besides - I dont know about you guys but I wouldnt repaint my engine room if I was still working on everything. I would finish the job - THEN pull everything apart and paint it!
I asume you didnt really spend 50 grand on your engine. I asume that is what it would cost if I would have you build that engine. The way I understand it you do it all by yourself - for yourself
It would be great if you could post more detailed pictures (AWD parts).