Dear sis,
First of all your UDM already looks cool. If I were you I would keep my original 16 inch rim. If the current wheels are giving problems (i.e badly dented, derormed) I would change back to the original size (16 inch) perhaps defferent design. You can't go wrong with original rims when it comes to ride comfort and performance. You enjoy the best of both worlds. They are well balanced. Once you change to 17 inch rims you are disturbing the 'state of equilibrium'. Your wheels are getting slightly bigger and you are riding a little bit higher. The result - the ride is getting bouncy. The car dives when you apply brakes. The only solution is to invest in sports suspension to lower it and also to make it more stable. Now, you are sacrificing comfort but your handling is excellent. You can take corners at a higher speeds. The stance looks better too. Having said that, what is the big problem? The problem is that the E46 comes with aluminium suspension and lower arm. Because of its lightweight in nature it is very sensitive to changes in centrifugal and centripetal forces. The heavier the rims (wheels) the more harm it will do. The first thing that is going to suffer is the bushings. Then, the problem will just continue from there. BMW answer to this is that if you want a nice looking car with big wheels and lower suspension, invest in M Sport model. There will be no problems in the future. Remember, BMW invested a lot when it comes to research and development. They didn't come up with 16 inch wheels for your car in just overnight. It was after a series of rigorous testings. The material they use for the rims is also not the same as the aftermarket rims. So, remember this also.
P/S: My approach to your question might be a bit conservative but just think about it.
Brgds/
funfer_fahrer