http://code.google.com/p/blendm3/
and get latest blender here: http://www.blender.org/download/get-25-alpha/

Place the .py script into :

On Windows, The Blender's Scripts Folder, (.blender/scripts),
will be in either,
C:\Program Files\Blender Foundation\Blender/.blender/scripts (XP &Vista)
or it will be in,
for XP:
C:\Documents and Settings\Brendon\Application Data\\Blender Foundation\Blender\.blender\scripts
For Vista:
C:\Users\Brendon\AppData\Roaming\Blender Foundation\Blender\.blender\scripts
The key here is when you install Blender it asks you if you want to install to Application Data,
As it's the first choice & we're in a hurry & it sounds good, This button often gets pressed.
If you read the other options, you can choose to install Blender in;
C:\Program Files\Blender Foundation\Blender/.blender/scripts,
or a directory of your choice.

Next, restart blender. The import menu should show Blizzard M3 (.m3), which you use to import the .m3. Animations and exporting not currently supported, to the best of my knowledge.

Version 0.14 has been released.

Found a second .m3 importer, don't know if its much better. https://github.com/muraj/m3_import
However, the other one that stante was doing seems to have stalled, so hopefully this one continues until we can export models

If you want, you can just export your file to me as a .obj I'll import it back into 3DS Max... I have a pretty reliable Importer/Exporter. It's a bit dodgy when importing raw .m3 files though - but exporting spits them out more or less perfectly.