I think you'll like the E39. A lot of people say that the interior isn't as nice, but I disagree. I think you'll find that the E39 interior is quite luxurious.

As for the mechanicals, I'd prefer the 97 because of the OBDII. Being able to hook up a pocket scanner (or a regular OBDII scanner connected to a laptop) has been a huge help in troubleshooting, and I much prefer it to electrical troubleshooting on older cars. That said, theres more electrical crap to go wrong, so pick your poison.

I want to say that the OBDII cars also have better fuel management (at least I know they have more O2 sensors), so without anything else to back that up with, I think thats why the E39 may get better fuel economy, although I got 19 in town with my 525i (5spd), yours seems low.

Last, you can run all sorts of E39 wheels without hub rings That saves you a clean $12!