Interesting thoughts Richard,
I often think we are very willing to overlook imperfections as we like the cars so much. Its the same with many things in life, there is also no such thing as the perfect car. Its hard to compare a DS, CX or whatever against other cars, they are what they are and many people buy them for veyr different reasons. Im sure Citroen purists buy them because they were the pinicle of Citroen design, both in styling and suspension terms. I doubt anyone buys them because they are looking for a refined motorway mile muncher, something which will be 100% reliable on a daily basis. Its not what the experience is about, and thats it, its an experience to own and drive these cars, its why we have them. If we compared classics with modern cars, they would simply not exist. I mean do you imagine a Austin 7 owner looks forward to a 100 motorway miles or uses it daily ... its all about the experience and what you like.
So maybe a 5 series can match or better the handling and ride of an Activa, they are no means the best handling cars, but then the BMW won't suit everyone. I for one find them very boring cars, not at all what interests me about a car and they are also everywhere. You say you spent £1000 on your Activa, it costs more than that to put a clutch in a Mondeo, for example. Who knows what a BMW 5 series could ammount in its lifetime. I know someone with an 2002 (the unusual looking one) 7 series, its got internal water leaks to the engine, he is thinking of scrapping it! You can pick up an Activa with the change you would find down the back of the sofa, and that will be such a lot of car and deliver such a driving pleasure that the slight amount to keep it going is worth it. You would lose far more on depreciation of a tiny hatchback than you will repairing an Activa for a year.
Its nice to have something a bit different, anyone can go out and buy a 5 series bmw, but to have something different is what its all about for me, even if its not a perfect design, it doesn't matter.
Most modern cars are very very dull, in fact I can't think of many which are interesting or fun to drive. Something which was highlighted to me when I was driving a 2cv the other week, so much fun I couldnt get the grin off my face.
I certainly doubt that if I owned a BMW 5 series or whatever rep mobile, that I would go out for a nice drive just for the sake of it. I certainly do in the Activa.
I doubt anyone would buy an Activa for a daily driver now, its all about having somehting unusual, something which you enjoy and interests you. Above all, there is no other car with the same advances in suspension of that age, it deserves credit for that. I find the Activa seriously good fun to drive, as standard the engine is a bit flat, but that can easily be improved. To get the handling and ride comfort that a Activa offers is somehting else, Im often going round corners grinning and thinking how odd it feels not to roll and how fast the thing can move round the twisties. I own it because I like it, it suits my driving and its something different - which very very few people will ever get the opportunity to drive, let alone own. For all you say it doesnt really offer any advantages, I really do beg to differ! However yes, in a lot of situations its not needed, I don't use mine everyday as my daily commute is motorways and city driving, the Activa is great at it but its not a route which requires an ARB, let alone ARCS! When I get it on the right roads, at the right speeds, it all makes sense and I realise why I have it.
Im surprised you own a Citroen at all actually, why haven't you got a 5 series?

Xantias are far from perfect, but you still came back to them from a BMW!