SINCE its January 2004 release, even the most gifted clairvoyant would have struggled to understand the BMW X3’s positioning against its only-slightly larger, roomier and suppler riding X5 sibling.

For many luxury SUV buyers, the choice was a no-brainer, especially when you factored in the prettier, and only slightly pricier, X5’s iconic status.

It was like choosing between Marcia and Jan Brady, Kylie and Dannii, or Dennis and Randy Quaid.

How were we to know that the X3’s place in the world will only make sense when the all-new, much larger and considerably more expensive X5 Version 2.0 arrives in March 2007?

Now that we do, it need no longer languish alone in a family of BMWs that – by their sheer competence – cast the compact SUV in the shade.

Helping the X3’s cause is a facelift.

Now, granted, it still looks just like the old car – save for some pretty minor bumper, grille, headlight and tail-light titivations outside, and a smattering of changes occurring inside – but, being a BMW – there are some very worthwhile engineering upgrades.

So while you might think that the nose and rear are still pretty messily presented, you will instantly notice the upmarket interior trim that goes a long way in helping to help justify the premium that this SUV demands.

A lovely new steering wheel, classier plastics, larger door pockets and a more BMW-like ambience (Austrian firm Magna Steyr assembles it) means that, from now on, X3 owners need not feel short-changed when taking a ride in their smug neighbour’s X5.

On the subject of dynamics, little has altered underneath, and it didn’t really need to as far as steering and handling qualities are concerned, particularly as a raft of changes were implemented in late 2004 to help address ride issues.

So, unsurprisingly, no compact SUV feels as surefooted, nimble or eager to corner as the X3.

Living up to the marque’s formidable reputation, the steering is beautifully linear and full of road-surface feedback.

Additionally, with BMW’s newly switchable traction and stability control set-up working in tandem with its excellent xDrive AWD system, the X3’s mighty dirt-road sturdiness can be sautéed with some tail- and side-sliding antics of a seriously fun nature.

This is the sort of 4WD wagon that the enthusiastic driver will not feel short-changed in.

Unfortunately, none of the roads sampled on the launch drive program featured the sort of potholes, bumps and irregularities that have revealed the outgoing X3’s Achilles Heel, its hard ride.

Since the country roads we drove the BMW on showed up the ride as being quite comfortable, we strongly suggest that you conduct your own urban ride quality test in more built-up areas. Overseas reports point to little improvement in this area, although regional tyre and specification differences may also have played a part in this.

We didn’t drive the 2.5si automatic either, but the 2.5si with the six-speed manual gearbox is a revelation on such roads, revving its petite petrol heart out like a good BMW should, providing a sweet little soundtrack that ultimately masks just how quick the least-expensive X3 really is.

As the model that is truest to the BMW driving ethos, you cannot dismiss the manual.

The 3.0si, available only in super-responsive six-speed auto guise, has a deeper note, significantly more mid-range punch, and the sort of high-speed overtaking ability that puts its fair and square into sports-sedan territory.

Interestingly, the test car was fitted with the 18-inch wheel and M-sport pack, which looks superb but seems a little too firm in ride to be offset by any perceptible handling or grip trade-off. Stick with the 17s, we say.

And last, but by no means least, is the 3.0d auto that more than half of all X3 buyers will choose. They shan’t be disappointed, either, since the diesel is indecently fast from the moment your foot floors the accelerator.

Sitting high and dry in your sumptuously cocooned cabin, you are blissfully unaware of any diesel engine related vibration, although you are left in no doubt that the powerplant ahead of you is muscular piece of equipment.

In all honesty, we came away with a newfound respect for the X3.

The styling is still too fussy. The current X5’s increasingly attractive pricing means that you still shouldn’t ignore this soon-to-die classic’s attractions, the ride quality in city areas is still a worrying unknown, and the raft of rivals emerging on the horizon may invalidate what we are about to say inside the next 12 months.

But, for now, and at last, the X3 finally emerges from the shadows, as a brilliantly rounded luxury/compact SUV with sporting credentials that are pretty much second-to-none.

If you read our minds before driving the latest model, you would know just how pleasantly surprised and delighted we are.