The M96 is both a step up and a step back.
M96 step up .....
Liquid cooled. Runs cooler, makes less noise and is easier to meet emission and noise regs. The DOHC and 4 Valve per cylinder is as much there for emissions reasons as it is for performance.
M96 step back.....
The M96 was engineered for consumer application only and is built to a certain price. It has no cross over endurance racing capability and is not certified for use with racing tires because its lack of a dry sump lube system can allow oil starvation when under high G's.
964 engine, as also used in GT3 and TT....
Air Cooled. No radiator, no water pump, no coolant lines running back and forth twice to the engine. Noisier and runs warmer. Owns most of the FIA endurance racing records in the world for a production car engine. Originally designed during the post war industrial craftsmanship era when labor and materials were no cost no object.
M96 Boxster and 996 applications ..
When Porsche announced the M96, they said that the 964/GT1 engine was DOA for street cars because it could not meet noise and emission laws. Then "miraculously" the GT1 engine appears in the 996 GT3 and 996TT. The actual strength of the M96 engine and its parts simply cannot take the added HP and sustained use needed for those cars performance requirements.
There is no doubt that Porsche needed the M96 engine to meet the 986's retail price, but the 996 had a retail price point starting at almost 75% more than a 986 and Porsche has stated that the 996 cost them only 10% more to make than the 986, so they had plenty of margin to have included the 964/GT1 engine in the 911.
But by not doing so, they created the first 911's ever that are incapable of being tracked on racing tires, basically they emptied a part of the 911's soul to make extra, extra profit.
Part of the more "visceral" feel you noticed in a older 911 is that pre 89 911's use a single mass flywheel, motor mounts that are not hydraulic and use a simple cable to connect the accelerator to the intake linkage. Also, the angle of the floor hinged pedals seem to encourage your right foot to press further and further down on the gas.
I left out that the 996TT engine does have liquid cooled heads.