I think the best solution would be to keep the GS, as a daily, and get a used e46 M3 as the fun car. yes you will be making payments, but you would have a Lexus and a M3!- I know most expensive option. Another option is to sell the GS, and get a beater car(coralla, civic, etc.., then get the M3.( I would not have the M3 as your only car)
Last option no one mentioned, sell the GS, and get a newer GS, say in a rarer color like blue or black cherry, with lower miles and still have some money left for mods.

 

If your choice is to get an M3.
I say keep the GS as your daily don't mod it, take what you would have used for mods and put it toward your M3's down payment so your car note wont be so huge. Yes you will have two stock cars but if you get a M3 it should hold you over. Remember you can always sell the GS later.

Option 2

Sell the GS and just move on. Get your IS or whatever and enjoy a brand new car. You can always mod it later.

 

you should mod the snot outta your car!

 

After paying $540/month for 3 yrs for a C230 we sold it and got a 92 SC400. Originally we were gonna get a lexus SUV but we're relieved from car payment so we're thinking of getting some non-luxury brand suv and pay cash. Nothing better than driving a car that's paid for. If I were to purchase the IS I'd go for a 3 yr old used one. It's almost identical to new ones but you're getting a deep discount JMO. It's your money so do what you like.