This Z3 orignally seemed a lot smaller compared to the newer Z4’s. 

Here is a spy photo taken around Nurburgring of a BMW Z4. 

BMW has said there will not be a M version but this looks to be a pretty sporty version. 

They have not announced any engine or performance upgrades at this time.

Sources: http://blogs.insideline.com/straightline/2009/10/spy-photo-bmw-z4-m-sport-package.html