This is a topic close to my heart as it is one of my pet hates, seeing 'M' bages on cars that are not genuine BMW Motorsport vehicles.
Too many 318i about with an 'M' badge, or even 'M3' badge on the boot. This is only cheapening the brand, and devaluing a genuine car IMHO.
For the BMW fan it is possible to spot the difference but your average car person or joe public will not know the difference and assume they are all equal.
At the end of the day, the 'M' badge is a statement of performance and exclusivity to be desired, why else would people be producing knock offs and sticking them on any old 3-series?
Obviously the genuine factory models, M1, M3, M5, M6 should have the badge, plus the limited factory productions of M325i, M535i, etc. Personally I think that even a 330i Motorsport should not have an 'M' badge, or possible a different version of same as it is not a fully worked M-sport car. A standard model that has been dealer ordered with some Motorsport upgrades, kit, etc. definately no, any other car added later on, again no.
Putting an 'M' badge on a 318i is a crime that should deny the owner the right to drive a Beemer, and people that put M3 badges on a 318i should be shot at dawn for such a crime.
Purely my opinion, feel free to dis-agree, but when you have yearned for an M3 since the first E30 model hit the roads two decades ago you tend to feel strongly about such matters, or is it just me?