True. In GT6 context is does not really matter.
Yay, top speed. Doesn't mean a lot. There are 130hp cars which can reach that. How fast do you get there compared to the ST ? Is your front axle as agile as a ST's ?
As for the BMW comparison, it's also true in GT6 (both tested in my Time Trial experiments) - although the difference isn't huge. But keep in mind both have similar displacement, but the diesel is turbocharged. FIA regulations usually give a displacement coefficient between x1.4 and x1.7 for turbocharged engines compared to petrol ones. Which would make the 120D an equivalent of something between 2.8l and 3.4l ... Same year model, same manufacturer, there's the M3 E46 which fits in, with a naturally aspirated petrol 3.2 delivering 340+ hp. Or I could point you towards the numerous turbocharged 2.0l petrol engines chilling around 300 hp figures. Heck, you can even find naturally aspirated 2.0 engines that are more powerful (SR20VE, K20A, F4R...)
That 120i is not built and sold as a sports car. But then, you have the 130i you could order with an M sports pack which came out one or two years later that will torch the top-tier diesel 1-series BMW. And even with a 3.0 inline-six, it is still lighter than the diesel one.
As for taxes, emissions laws are ******** in EU, clearly favoring the diesels for years to support local industries (while Japan banned them in cities for decades because it was health threatening, which might also be a reason as pointed out by
@Huks ). Even with the VW scandal, they managed to actually say they'd raise the limits for diesels, because the poor chaps couldn't deal with them.