Changing the name of the "is" into "I-am-almost-an-M-but-not-really" is just what BMW has to do given the new directions from marketing. Why did they call it a 35is and not a 38i or 40i in the first place anyway?
It is not exciting or pretty with an M-letter on the Z4 if you ask me. Please let a Z4 be a Z-car just like an M3 is an M-car and an X3 is an X-car. And then feel free to offer 2 seater or 4x4 (GTR-type) versions of any M-cars, but not the other way around! My point is that an X5 with a twin turbo 560hp V8 is fine, but dont call it an X5M. Just call it a (fast) X5 because that is what it is!
Yes, an LSD would make it easier to drift a Z4, and it should have been available as an option, but this is a roadster! It cannot become a focused race car at the same time. I think the point of driving this car is to enjoy sporty/GT driving with a big smile on open roads. I dont see why it has to aspire to racing or M when it is already a Z.
And btw I just checked fastestlaptimes.com. At 1:42.30 the 35is was less than half a second slower around the "Autozeitung test track" vs the M3 convertible.