Figured I'd update with my perspectives on the two cars:
Disclaimer - I've test driven the FRS twice. Just my initial impressions vs. the 128i I purchased recently
The FRS/BRZ and the 128i are two different cars that share the same basic mechanical setups - 6spd, coupe, sporty, and in the same price range (sorta). Everything else they go about differently. The boxer flat four is coarse, loud, and doesn't have any torque. The inline 6 is smooth, silky, refined, but doesn't really have a mean side to it (it doesn't "come alive"). The frs/brz shifter has short throws, feels notchy. BMW shifter is smoother, but you really row. The frs/brz suspension is tight, responsive, but harsh in that you really can feel the road, including all of its imperfections. The 1 series sport suspension is softer, at higher speeds it wallows a bit, but tries to strike a balance for everyday comfort while still being sporty. The interiors are worlds apart - frs/brz is no frills to a fault, you sit low and visibility is poor out the rear end. The 1 series is tall, dorky looking, and has just the right blend of "luxury" (its not really) with simplicity, assuming you don't opt for idrive/navi. Steering feel - it's a toss up. The frs/brz steering feel isn't that hot, when compared to the handling ability. The 1 series is still hydraulic steering, so it's eons better than the current 3 series and most new bmws with electric steering. However, it doesn't have the feel/feedback that I had with me e36 m3.
Ultimately, the decision came down to what I'm more comfortable with. I'm too old to be driving a car like the frs/brz where you're sitting super low and feel and hear everything on the road. I considered getting the brz and installing sound deadening in the doors, trunk, under the carpet. That's how loud it is inside the car - check out this forum and you'll see a good amount of members have done the same. The 1 series suspension can be upgraded to m3 bits that improve the responsiveness and handling. If only the 1 series didn't look so bubbly, and looked more like the upcoming 2 series replacement:
http://www.2addicts.com/forums/showthread.php?t=841137
To sum everything up - the 2 cars appeal to 2 different buyers. Figure out which type of buyer you are and you'll know which car is right for you.