To answer your steering question, both the 535xi and 550xi have hydraulic steering so the feel should be the same. If you were comparing a 535xi with a 550i, then the steering on the latter would feel different due to the electric steering on the RWD models. I haven't driven the AWD models so can't comment too much on that.
As for the engines, my experience is similar throughout my multiple test drives between the 535 and 550. Yes, the inline 6 has a more sportier feel overall. The V8 is smoother but the power is really in the acceleration. Not to take anything away from the inline 6 which is a great engine, but the acceleration in the V8 is effortless. They are just different engines. It is subjective so go with what you like better.
When I was shopping between the two, here were the main differences with the 550: 1) Navigation, multi-contour seats, rear camera, park distance were all standard 2) V8 Engine 3) Lack of auto start stop - ASS 4) rectangular exhaust tips.
2013 BMW X5 35i
Alpine White | Cinnamon Brown | M Sport
2013 BMW 550i
Titanium Silver | Black | M Sport
Last edited by Decboy; 01-26-2013 at 04:11 PM.