What would it take to get the M3 preformance from a 1998 323is?

There is no way you could get M3 performance just from tacking stuff to your 323is. Even if you succeed in boosting the engine power, your suspension/brakes are nowhere like the M3's.

Also, the E36 M3 has a few versions. The top one having 321hp. Your 323is only gets you around 168hp. Even if you could add a big turbo charger, eventually, something's gotta give because the components of the car was not designed for such huge engine power. And it will be expensive when it happens.

Also, with 140000 miles on it, the engine is not exactly the prime candidate for such modifications.

The best way to get M3 performance is to buy an M3. It will be cheaper in the long run anyway.

First question: Which M3? Each "Generation" had drastically different performance numbers. The easiest way to match M3 performance, at least in HP and Torque, would be to transplant an M3 engine into your car - but that will require a lot of custom fabrication / welding / wiring, etc. If you don't want to do that, you would need to supercharge or tubocharge it.

I would trade it in for a 2003 M3.

Anyways, add a custom intake, or a supercharger.