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It's business. People want bigger cars (at least in the US) so BMW is building them bigger. With engineering magic they're making them weigh about the same as the old ones though.
From an enthusiast standpoint, sure we'd love to have an extra car that's small and agile like the 1M (I'd love one). But the Ms have always seemed (to me anyway) to be an super performance version of the regular series cars. Use high quality lightweight materials, upgrade the suspension/engine/tranny, etc but the car is still based on the regular models.
As the public demands bigger cars for the regular models, the Ms have had nothing to do but go bigger also. Otherwise they'd have to redesign a completely new car and a M3 or M5 wouldn't be what they were intended before (and probably cost a lot more given the number of units compared to the regular models sold).
In the end it's all about giving the majority what they want to make the most money. There will always be those that want something specialized for the super enthusiast but there isn't much money in that due to the low volume and high cost.
I do think that since they have the 1 series they can give us what we want from a size/agility standpoint. But unfortunately, they'll probably use the same quality of materials inside as the 1 series, so don't expect a 'luxury' car like you'd get from the M5. Also, I don't expect them do drop in the M4 engine in it because a M2 with a M4 engine would severely cut into the M4 sales. It is nice to dream though.
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