I have never been thrilled with the A/C on my M3. I have heard this criticism before about E36 A/C systems. My honda Civic A/C was WAY colder! A shop checked mine once and said it was charged fine, but I have my doubts. Is it just my system or do others with E36's think there systems are 'not the best' as well?

I can freeze my ass off in 100 degree weather in my car. Do you have your upper vent control set to full cold (blue dots)? (or you might not have that kinda thing depending on your model, not sure)

Yes its on cold. I wonder if they changed the A/C system from 95-98? I realize they changed control units, but that shouldn't affect A/C performance. I also pose another question - If you have your A/C on recycle (as opposed to fresh), does the air filter through the cockpit pollen filter? If it does, maybe the filter is way clogged! I've been putting off changeing it because its a PITA. With Louisiana summers, I need to soon though! This variance in climate (San Diego- dry, Loosiana-drenched) may make a large differance too.

A lot of people have reported improved air flow after replacing a dirty microfilter. You may just have to bite the bullet and replace yours. It's a PITA the first time, but it's gotta be done.

You've probably already thought of this, but if you have no passengers, you can close the passenger side air vents to increase air flow on your side.

My 95 M3 works pretty good - about 38-40 deg F air when moving down the road. If your AC is working subpar and you live down south where there are lots of bugs, you may have a clogged condensor. About the only way to clean it is to remove the radiator so you have access to the back of it. You can use high pressure air or water to clean it, just be careful not to bend the fins if you use high pressure water spray (a pressure washer can lay the fins flat, trust me).

But IS the air filter used on RECIRCULATION mode?

Yes it is. I would highly recommend you to replace it as soon as you get a chance. I can assure you a noticeable improvement.
I was having the same issue last summer, but after replacing the microfilter life has been good. :)