Hi Rob,
There were several reasons why I chose the S28i, certainly one reason over the 35i was the price. In Australia, $89,700.00 (U.S $88,500.00 approx)is the entry price for the s28i, add the M package $3,900.00 and metallic paint $1840.00, plus deliver and taxes etc, $100k plus. The 35i is $109,000.00 entry, plus all above, $120k plus. Both prices are well above M6, 911, U.S prices but that's another story, smaller market here, higher taxes, delivery etc and less of a supply demand from BMW.
So definitely the price.
As for satisfaction, the S28i (N20), has ample power, 1800 Kms (1150 miles) on the clock and the engine feels much more open. I have had an M3 before with similar 0-100 km/h, 0-60 times, high 5's secs, low 14's 1/4 mile. To be honest the N20 feels much more punchier and much less an effort to accelerate in and out of traffic. Since I've had the car 70% of driving has been city driving and my average is 7.2 litres per 100 Kms ( about 39 mpg), and that's not without the regular spurts of acceleration.
On the day I signed up for the car, I was ready to sign an E60 M5 2006 model, so yes I do want power, definitely and understand where your predicament is. However I test drove an auto 8 speed S20i that day as mine was the first S28i Z4 in South Australia and no test vehicles available. Yes the power was in hindsight a great deal less than mine, but no matter how slow or fast I drove it, it felt magnificent driving it.
The S28i more than meets my needs and being manual, it actually is 2/10 sec quicker than 8 speed to 100 km/h/60 mph (5.5 secs/5.4 secs), so in reality it's only a little slower in acceleration to the above against the S35i, the s35is is M3 territory though.
Fuel comparisons are greater, in favour of the N20. So if you like a lot of driving at cruising speed for 90% of the time, the N20 is the choice here.
I have not physically compared both and can only compare with my previous M3, but if that M3 had the N20 in it, it would have been a punchier car.
At the end of the day if both were the same price (for that special day sale) yes I would of chosen the S35i.
My answer to your question finally, is it is not worth paying 20-25 percent more for something (power) you will only use maybe 5-10% of the time. If there is little difference in price such as a demo or used car and it has all the specs you like, the the argument is in favour for the S35i
I hope I helped you
Cheers.