I would honestly like to become a Chinese citizen, since my life and my wife are here, and have almost no desire to go back to America for anything (except cheese dip, fritos, and big T-shirts).
It's pretty difficult to be approved for citizenship. Most applications from other than those with Chinese ancestry are either refused outright or "in processing" for years. Even those who gave up their Chinese citizenship to immigrate abroad have troubles regaining their Chinese citizenship when they decide to return to China to stay. But you can give it a try. The application fee is only about 40 RMB.
Regarding permanent residency (Chinese green card), there is a wealth of misinformation available, including on this thread. First of all, the "D" visa, for all practical purposes, no longer exists. Also, the process is not different depending on where you apply since the Ministry of Public Security is the ultimate approval authority and they closely review each and every application in committee. Local or provincial PSBs have no voice or vote in the decision making process. Their role is to gather the information required and forward it to the MPS.
There are about 7 categories under which may apply for PR. There are none that grant PR based only on length of residence in China and a desire to live here forever. For those who apply based on being the spouse of a Chinese national or PR, the basic requirements are:
1. Married at least 5 years;
2. Subsequent to marriage and just prior to your application for PR, must have lived in China for 5 continuous years -- with cumulative absences of no more than 3 months per year;
3. "Stable" residence;
4. "Stable" employment;
5. Certification of no criminal record on a national level from your country of nationality;
6. Passing a rather substantial local background investigation.
As of July of 2007, there are only about 1,000 PRs in all of China, and very, very few are marriage based. The vast majority of applications -- even in Shanghai -- are refused.