Chris, Vincent & gruppe: Nice to hear from fellow upstate NY ///M owners. I'm up here in the capital region (read: Albany) and went through this for my 98 M3/4 last year. Here's what I can say from experience:

1. Joe is right, insofar as no BMW 16" rim will clear your M3 front brake calipers. Confirmed it at a local shop.
2. Neil is, of course, right that certain aftermarket 16" wheels will clear. Borbet type T (and I believe another Borbet style works, too) is the best quality, most-readily available example. ACT 16" (available thru spring '98), MM(?) synthesis--available thru winter 98-99 at tire rack, and OZ forza-- which I bought from Tire Rack at closeout in Oct. 98 are others, plus there were at least two others readily available last fall but the names escape me (I do have the info somewhere at home if someone really MUST know, however). The OZs I have are adequate, but not great--certainly not as good as Borbets, but I only paid $119 each. Can't comment on the quality of the rest. I suggest you look at the classifieds in the Roundel and your local chapter newsletter-- you might find a used set in good condition. Even browsing through the local pennysaver or swap sheet might turn something up, but be careful to try the fit before you buy. Bottom line: if money isn't the issue, Borbet Ts w/ tires all mounted up from tire rack may be the best turn-key solution. I deal with Troy over there-- he's good people, knows what customer service means, and knows the M3.
3. Also as Neil said, with any 16" wheel the balance weights need to be placed outside the area swept by the brakes-- either deep inside the rim surface or on the very outside back edge. If alerted, a good shop will do this with no problems.
4. Tires present a set of trade-offs-- max snow/ice traction vs. dry road cornering/performance vs. longevity. Yes, Blizzaks are great in the traction dept.WHEN NEW, but their ice traction compound doesn't run through full tread depth, so after a few 32nds of wear you're down to a good all-season radial. Besides, their tread depth/design is very squirrelly at speed and in the corners. Word is the Pirelli winter 210P (and other models in that group) sacrifice a bit of ice traction to the blinks but are worlds better in all other conditions, and are pricier too. A compromise to consider (and the way I went) is to get YOKO guarded-- I found the traction to be great, and less squirrelly and noisy than the blizzaks. Good price & great value, IMHO. Also, performance doesn't radically change with wear like the blizzaks.

Good luck, hope this helps. Email me privately if you have any questions. John, 98 M3/4-- w/ show shoes