How's the reliability on these things? I've always loved the 135i since it came out but I've always heard horror stories about BMW's.

Reliability has been very good with the newest 135i, 2008 to present. The were initally problems with the high pressure fuel pumps on 08, 09 and some 10 models, but those issues have been resolved by BMW with software upgrades and/or replacement of the fuel pump (the car has direct injection). BMW also provided an extended warranty to owners of those vehicles covering fuel pump issue. Apparently the fix has worked because it seems to be a non issue at this point. My car had the software upgrade and I have had no issues.

BMW switched from the N54 twin turbo motor to the N55 single twin scroll turbo beginning with the 2011 model year. The N54 motor has proven to be easier to mod and tends to be the preferred motor for those seeking more power. I have the N54 with the Dinan Stage 2 upgrade (378 hp, 416 lb/ft). The 2011 1 series M came with the N54 motor rather than the N55 so that tells me that BMW knows it is capable of making more power too. The 7 speed dual clutch transmission which became available in 2011 is paired only with the N55 motor.

Same here... the bimmer was taken out pretty early in the game on my list of cars to buy. Not because its ugly or anything. But because reliability its toilet bowl ahyyty. Fuel pump issues and various recalls up the ying yang. The warranty doesn't help any cuz you're still stuck with the car after it expires...
Certain colors don't look good on this car. Black and white do best... the 1M orangy color is nice too... that's about it.

So which do you prefer in the handling dept.? The Z or 135i

Stock versus stock the Z wins hands down in the handling department, especially if the Z has the sport package. The 135i is more of a grand tourer than a true sports car. However, with the right suspension mods the 135i can be transformed into a pretty good handling car.

The first thing I did to my 135i was ditch the stock wheels and runflats in favor of larger wheels and non runflat perfomance tires. That helps a bunch. Then I added an M3 28mm front sway bar (from the M3 convertible), M3 control arms and M3 tension rods. Those M3 parts are direct bolt ons to the 1. Next I added M sport springs from a 2011 135i and Koni Sport adjustable dampers. For the 2011 model year BMW switched from progressive to stiffer linear springs on the M sport equipped cars. The car now handles like I thought it should have stock without much compromise in the ride quality. Currently I think my 135i handles as good as a stock sport package 370Z, if not slightly better.

The biggest difference between the Z and the 135i is the motor. The 135i has so much torque, especially when tuned.

Considering all that torque how is traction?

My 370z is horrible. Mind you I'm still on stock tires but I can have the rear end come out sideways while doing a rolling start in 2nd gear going straight. It's crazy to think that a car with this wide of tires and so little torque can have such traction issues. My previous 06 Vette was no where near like this and my girlfriends current Camaro (although weight could be a factor) is also much better. I'm planning on getting some Pilot sports soon and hoping that makes things better.

I changed my wheels and tires (as well as my suspension) shortly after purchasing my 370Z so I really never experienced much in the way of traction issues with the car. The only traction issues I had is when I initially set the rear aftermarket sway bar too stiff. It made the car want to oversteer. But softening it up corrected that issue for the most part.

I too had a 2006 Corvette and that thing had traction issues when the temp was less than 50 degrees. It always seemed to be to be on the verge of loosing traction when you got on it too, no matter the temp. That coupled with the vague steering made the Vette feel loose to me and I never really felt very comfortable with the car in terms of driving it hard.

The 135i feels somewhere in between the two to me in terms of traction. It will fishtail some when you really get on it, but it doesn't feel as loose to me as the Vette did. The steering feel is much better than the Vette too.

Cool weather on summer tires will break traction all the time.

Especially if they are runflats like Corvettes come with.

Yeah. Anything below 60-degrees and straightline grip is minimal on OEM rubbers. Though my Michelin Super Sports are coming in pair by pair, so I'll see how they compare in colder weather compared to stockers.