Until the B8, I agree with you, they were pretty small as far as REAR seat space goes. The B8 however, is quite big, about as big as the C5 A6 actually. You will also see the new 3 series grow as well.
The C6 A6 can be had with the 3.0T engine and should be easily had for 30-35k. Auto only, as with all A6s besides the 2.7T c5. The A6s have been getting stellar reviews lately, with the 3.0T, both C6 and C7.
Unless he lives in another country, it isn't a 2006. Unless sound and looks create your driving pleasure, the B8 6mt S4 is the better car to drive without a doubt.
I almost bought a 335 and 135 within the past 6 months. Go read the forums on their issues and how crazy BMW is on voiding the warranty. This isn't regular modded car = void warranty talk, its insane. Turned me off to owning one. First car that a forum experience has ever done that for me.