The answer to that question is really simple. I need the AWD drive capabilities to get through the typical suburban New York winter. While I don't live in the mountains, I have to travel over interstates, hilly and twisty local roads on my daily 100 mile commute. These roads may, or may not be plowed. After years of driving RWD and FWD cars, I now view AWD as a necessity. For example, during a storm last year, I had to use my X3 to pull my wife's FWD car (with snow tires) over a snow covered incline near our home - just so it could be parked in a safe spot until the roads were cleared.
As for the body style - sedans just don't have the versatility. Large SUVs are too cumbersome and inefficient, and most compact hatchbacks are just too compact. Toss in the need to have something fun to drive during the other three season, and our love of a manual transmission, the number of cars that fit the bill becomes very small. Thus we wait for the X1, hoping it will be a suitable replacement for a remarkably versatile, mechanically reliable, bright metallic red, manual transmission, 2001 PT cruiser with 260,000 miles.
Oh, by the way, while driving near BMW's northern NJ headquarters today, I saw a X1 on the road. I could only manage on photo, but it looked sleek from the side.