My 325xi gets bloody awful fuel economy - easily 40 - 60 percent less
than the EPA rating - dealership can't figure out why - I'm not a
leadfoot, nor is my driving exclusively "city."
 Hoping that when my lease expires in 2007 BMW will have a hybrid all
wheel drive sedan ready by then.
 Anyone know if they plan on a hybrid AWD vehicle?

"BMW plans to offer a car that runs on both petrol and hydrogen within
the next four years."
http://www.bmwworld.com/hydrogen/hybrid.htm

I don't know about these new hydrogen cars, but as far as electric
cars go... they're not much of a deal.  I'm a huge fan of fuel
efficient cars, and I think alternatively powered cars will be the
wave of the future, but the excessively heavy batteries that provide
little power aren't a big help to the cars they reside in.
Take the Toyota Prius for example.  It is basically the same car as
the Toyota Echo (very similar size, design, total power...) yet it
costs about $6000 more.  The main difference between the 2 cars is
that the Prius weighs 900 lbs more than the Echo meaning that in
reality it has much less pic up than the Echo.

If you want to trade $6,000 (+ another $4,000 or so when your battery
dies) and alot of power for about 25% more gas mileage then an
electric car is for you.  Otherwise, I highly recommend looking at
other small cars that are much more zippy, cheaper and durable than
the current electric models.

Hopefully hydrogen will prove to be a wonderful supplement to auto
engines in the near future.

Problem is that having all wheel drive is de rigeur for me, since I
drive all day from client to client - and not too many AWD vehicles
are especially fuel efficient.
  I'd go for a Subaru for my next vehicle, but the problem is that the
BMW I'm driving has damage and excess mileage, and my understanding is
that I can expect some degree of lenience on these if I lease another
vehicle from the same dealer or brand.
  But, I'd rather not step into another gas guzzler.

I did some research for you, I was highly inspired because I'm a huge
fan of reducing gas waste.
Here are the 2004 models with AWD and their gas mileage (I'm sure i's
very close to 2005 data):
Audi A8/S8          17/24
Audi Allroad        15/23
Audi S6/RS 6
Jaguar X-Type       18/26
Subaru Impreza      19/26
Subaru Legacy       22/27
Volvo XC70
Audi A6             20/27
Audi A4             23/29
Audi S4             15/21
BMW 3 Series        20/29
Mercedes-Benz C-Class   18/26
Suzuki Aerio        24/29
Volvo S60           20/27
Mitsubishi Lancer   25/31
Volkswagen Passat   21/30
Pontiac Vibe        29/34
Toyota Matrix       26/31
Volvo V70           20/27
Volvo S80           20/27
Chevy K1500 Silverado  13/17
Chevy Astro         15/19
Infinity FX45       15/19
Pontiac Aztec       18/24
Saturn Vue          21/26
Subaru Baja         21/28
Subaru Forester     19/23

http://www.fueleconomy.gov/feg/FEG2004.pdf
http://www.usatoday.com/money/autos/2003-10-30-allwheel_x.htm

This isn't quite an exhaustive list, but it's most of them.  

My parents drive the Pontiac Vibe and they love it.  They drive alot
of country miles and they get about 33 mpg.  If you're looking for
more of a luxury car I'm afraid I'm not of much use with suggestions,
but I hope the list is helpful!