My wife has a TT 3.2 DSG (05 reg, same chassis as your A3?), I tested an E46 M3 SMG, then bought an S4 Tip. I also tried a 2000 reg 911 C4, but it wasn't the buzz it should have been, and risky at that age/miles.
M3 was a disappointment. Gutless mid-range for a car with such a reputation, and SMG semi-auto was crude and clunky. I would have your A3 over that, the wonderful DSG being the clincher. I love driving my wife's TT, but not to the hairdresser's
Then I saw a repeat of Top Gear on Dave, with the famous M3 vs S4 test. I was frankly shocked by the S4's speed - only a couple of lengths behind the M3 in the drag, but thrashed it around the track. So I had a test drive, was instantly smitten by the V8 with it's mid-range torque, super-smoothness, and wonderful sound. And the Tiptronic was damn good for a slush-box, so I bought it a few weeks ago.
Very happy indeed. Can't stop driving the thing. Only drawback is fuel consumption (22mpg of super average over last 1,500 miles). It's a peerless mile muncher, just awesome, and when you use a few revs it truly flies. It feels fast for sure, but I always get a shock looking at the speedo - I know it's a cliche, but I'm always going 20mph faster than I thought. It's a step up from your A3 in every dimension (except the DSG) but not by a huge amount. If you just want to go faster, get VAG-Tech
www.vagtech.co.uk to stick a turbo on your A3. Not cheap, but 400bhp

Or bolt on some NOS.
Now is a very good time to buy an S4. There's one on the Audi UK website now (in Halesowen) that was advertised at £20k around Xmas. That car was offered to me in early Jan for £18,500, and is now advertised for £17k (and has four new Goodyear F1 Assyms which is nice). That's a 40-plus grand car, under three years old, that would have sold last year for £25-£28k. Bit of a bargain, with full Audi warranty, too.
The problem of course, is selling your A3. Sorry to say it, but big engined petrol cars are not popular right now. No sir. Audi has even discontinued both the A3 3.2, and the S4 4.2. Expect to be offered peanuts in PX - you can't have it both ways.