My '10 M5 is perfectly enjoyable around town I personally found the key to (relatively) smooth driving to be:
1. "Instruct" the car to upshift via your right foot. If it hangs onto a lower gear too long, lift your foot off the accelerator lightly, and it'll generally shift up. This gets better with time and conditioning as the transmission/car learns how you drive.
2. Keep it in D3 around town. I find that in D4/5 it hangs onto low gears/higher RPMs uncomfortably long, and its much more prone to shifting "luxuriously" in D3. I have never tried D1-2 - they may be even better.
3. Around town, I personally find the car more comfortable to drive/less twitchy in P400 - the less sensitive throttle and lower power output seems to help.
1-3 wil help, in my experience, but it'll still never shift as smoothly as a regular automatic or DSG.