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As a former 1M owner and current F10 M5 owner, AWD would be a welcome improvement.
I really enjoy xDrive, which apparently is a rare opinion in this thread. If the 550 xDrive were available with a manual or DCT, I'd have gotten it instead. (It's a shame the M5 also doesn't have ceramic-control or radar-cruise options.)
AWD didn't make a lot of sense on the previous-gen naturally-aspirated M cars, but the new turbos bring so much torque so quickly at the low end, most of which can't be used off the line and at at low speeds without breaking out the rear end or being cut by DTC.
It's hard to fully enjoy or use the power of the current M5 day-to-day because it has so much more power than traction. I see little reason to add even more power in the next-gen one without adding AWD —*most M5 customers, most of the time, wouldn't see any usable gain.
Sure, AWD isn't as good for purists or track use. But most M5 owners, most of the time, aren't on tracks, and as purists go, the M5 is too big and heavy anyway (and likely to remain so, even with weight-saving measures in the G series).
BMW M's recent statements have been pretty clear: RWD purists and track drivers should be looking at the M3/4, which will remain a purist's car. The M5/6 will not be afraid to serve the *actual* market demand for $100K+ super-sport executive sedans, most of which will never see a track, and whose current buyers usually demand AWD and are often buying another brand to get it.
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