Lauren, you are 100% correct. However, BMW now uses the engine size to denote what engine size would be used at the power level being made. For example, the 328 actually is a 3.0L, but a little underpowered for that size these days. The 335 is also a 3.0L, but has the power of a 3.5L, and so on. Read more below from Wikipedia.
BMW vehicles follow a certain nomenclature; usually a 3 digit number is followed by 1 or 2 letters. The first number represents the series number. The next two numbers traditionally represent the engine displacement in cubic centimeters divided by 100. A similar nomenclature is used by BMW Motorrad for their motorcycles.
The system of letters can be used in combination, and is as follows:
A = automatic transmission
C = coupe
c = cabriolet
d = diesel†
e = eta (efficient economy, from the Greek letter 'η')
g = compressed natural gas/CNG
h = hydrogen
i = fuel-injected
L = long wheelbase
s = sport††
sDrive = rear wheel drive
T = touring (wagon/estate)
t = hatchback
x / xDrive = BMW xDrive all wheel drive
† historic nomenclature indicating "td" refers to "Turbo Diesel", not a diesel hatchback or touring model (524td, 525td)
†† typically includes sport seats, spoiler, aerodynamic body kit, upgraded wheels, etc.
For example, a BMW 760Li is a fuel-injected 7 Series with a long wheelbase and 6.0 liters of displacement.
However, there are exceptions. The 2007 BMW 328i is a 3 Series that has a 3.0 liter engine. The E36 and E46 323i and E39 523i had 2.5 liter engines. The E36 318i made after 1996 has a 1.9L engine (M44) as opposed to the 1.8L (M42) used in the 92-95 models. The 2007 BMW 335i also has a 3.0 liter engine; however it is twin-turbocharged, which is not identified by the nomenclature.
The 'M' - for Motorsport - identifies the vehicle as a high-performance model of a particular series (e.g. M3, M5, M6, etc). For example, the M6 is the highest performing vehicle in the 6 Series lineup. Although 'M' cars should be separated into their respective series platforms, it is very common to see 'M' cars grouped together as its own series.
When 'L' supersedes the series number (e.g. L6, L7, etc) it identifies the vehicle as a special luxury variant, featuring extended leather and special interior appointments. The L7 is based on the E23 and E38, and the L6 is based on the E24.
When 'X' is capitalized and supersedes the series number (e.g. X3, X5, etc.) it identifies the vehicle as one of BMW's Sports Activity Vehicles (SAV), featuring BMW's xDrive.
The 'Z' identifies the vehicle as a two seat roadster (e.g. Z1, Z3, Z4, etc). 'M' variants of 'Z' models have the 'M' as a suffix or prefix, depending on country of sale (e.g. 'Z4 M' is 'M Roadster' in Canada).
Previous X & Z vehicles had 'i' or 'si' following the engine displacement number (denoted in liters). BMW is now globally standardizing this nomenclature on X & Z vehicles by using 'sDrive' or 'xDrive' (simply meaning rear or all wheel drive, respectively) followed by two numbers which vaguely represent the vehicle's engine (e.g. Z4 sDrive35i is a rear wheel drive Z4 roadster with a 3.0L twin-turbo fuel-injected engine).