I don't think Ferrari would think of Mercedes-AMG as a worthy rival. BMW's M division was, and still is, Mercedes-AMG's eternal rival.
If the new McLaren MP4-12C was co-developed by BMW, as is the case on the legendary McLaren F1, it would be a better rivalry, considering Mercedes and McLaren broke up recently.
Engine choices? Who knows, maybe the supercharged 5.4L V8 from the old "McMerc" SLR, or the twin-turbo 6.0L V12 from the S-, CL-, and SL-classes might make its way through.