The way you stated your statement, it seemed like you were saying the M3 was a completely different car that was made from scratch. You even said right now that the ISF is a just an IS with a bigger engine., which isn't true. it has an 8-speed auto tranny, bigger brakes, better suspension, bigger wheels, new exhaust, etc... Are you really going to tell me the M3 isn't just a new body kit, bigger engine, better suspension, bigger breaks, new tranny, etc... come to think of it, the tranny is probably the same used in the 335 (not sure though).
Again, I never denied M/AMG/S models aren't suped up versions, but are done better, likely due to years of being in the segment, and provide more options.
I don't know about picking every little option but I think having all the standard features is better than having barely any. I know I do. It also works with Nissan Altima coupe, most of their options are 1-2 at most and are a package.
Sure, with an Altima, it's great to have lots of features standard, but when you start talking about performance cars, even including the likes of Porsches and Ferraris, having a la carte options is going to be preferred, because it allows your non-enthusiast to create a more luxurious sports car while giving your enthusiast buyer the option to have a car with few options. It also allows people to have a more personalized car -- if you're going to drop $70k+ on a car, it's nice to have lots of options to make it "your car."
My belief that the price difference is $8k-$10k also comes from the fact that the M3 coupe and convertible are an option M3 buyers could choose from. Look into those options and the price difference jumps but I know we are talking about the sedans. But if you really want to get to the nitty-gritty of things, you can get a much higher discount on the ISF than that of the M3 so either way, you will be paying much more for the M3. I just tried building a fully loaded ISF at Lexus.com and a fully loaded M3 at BMWUSA.com and the M3 sedan came up to about $70k ($72k with M double clutch tranny) and the ISF came to about $62k, that is an $8k-$10k difference. Even the split back seat is an option that has to be purchased from BMW, the same with the moonroof. Yeah I know who cares about the split backseat but you got to admit, BMW is more expensive and there really isn't anything wrong with that, that is just how Lexus wins most of their customers, drivers enthusiast or not. The same with Infiniti and Acura. The Japanese car companies are just giving more for a cheaper price compared to their German counter part.
Well, see, that's where you're not pricing and comparing properly as I did above. Like I said, the IS-F is fully loaded and actually offers buyers very little options -- Nav/upgrade sound, 6 metallic color choices, and only 2 interior leather choice... that's it. The BMW has was a lot more options, which is why a fully loaded one will give you a higher price. In fact, it has options that the Lexus doesn't offer as an option or standard on the IS-F. The split back fold down seat you mention that is an option with the BMW is neither available as an option or standard with the Lexus, along with the M3's headlight washers, electronic dampening control, power folding mirrors, power rear sunshade, auto high beams, and park distance control.