The suspension (PASM in particular) is the most significant improvement, in my mind. The overall ride quality is more refined as well, but then again some would prefer the more raw feel of the 986. It's slight, but noticeable.
They do both feel like Boxsters - you aren't getting out of one and into another and feeling like they are totally different cars - both have the same 'on rails' feeling, both have tremendous handling because of the mid-engine layout, and the steering is what always sets Porsche apart, and both have the same great steering feel.
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Todd
2005 Boxster S - Atlas Grey/Black, PASM, Sport Chrono, Bose
2006 Infiniti M35 Sport
2007 Cadillac Escalade (tow vehicle with bling)
'00 Boxster - 2.7l w/FVD ECU tuning, Moton double adjustable suspension, custom stainless headers, lightweight flywheel, dual Magnaflow mufflers, 18" CCR wheels, 911 front brakes in front, Boxster front brakes in rear, full welded cage.
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