Mike,
That quote is suggesting the M535i is not a true M-car. Fair enough. However, you might consider the way BMW marketed the (E28) M535i. In Germany, France and the UK (at least) a separate brochure was produced for this model.
According to BMW GB there were 2073 RHD M535i's: a contemporary magazine stated that BMW sold 10 M535's for every 535i. In the January '85 GB price list there's a footnote, “a 535i version is also available without M-Technic spoiler equipment”. No separate price was quoted. In the February '86 pricelist the 535i is listed as a separate model at a lower price.
The M535i could be ordered with the close ratio gearbox, the overdrive gearbox or the 4-speed switchable automatic - these were all No Cost Options. This helps explain why over 700 of the RHD M535's were automatics and some have overdrive 'boxes.
Keep on posting! Regards, Mfiver