A few thoughts on the non-motor side of the project.
I have a '79 that I had up to about 120hp at the crank using Weber 32/36 for a few years, and now I have it up to about 160hp N.A. at the crank using Motronic 1.3. But that's with a 6-cyl block.
I track it fairly often. This weekend, my instructor was a woman who started out tracking a 320i in 1979. She turbo'd hers after the first couple years, and said it was an improvement, because it finally gave her a little throttle-steer capability.
When I went from 120 to 160, the extra power was pretty much useless because of the open differential. I eventually found an LSD for it, but it wasn't easy or cheap. Also, 160 may be plain old too much for the rear end, because I have already broken one diff cover. So, I now try to keep at least one cover in the track spares.
On the one hand, the car is a real handful on the track. It doesn't transition from one attitude to the next at all gracefully; I need to be smooth and plan my moves in advance. Its main goal in life is to oversteer. If I am braking heavily, I better have the car on a straight line. If I am lifting off the throttle, I better have the car in a straight line.
Example: There was a new-ish instructor at skid pad this weekend. We went out and he gave me a 3.5, which is a pretty good score. Then I let him take the car out and try to manage the oversteer. He spun repeatedly. Then he went back and gave me a higher score.
On the other hand, that oversteer is a useful track tool for me now that I know how to use it. And the car really has no pity for any driver error, so I have improved my track skills in less time than I would in, say, my E92 M3.
On the third hand: brakes. Mine has 4 wheel disc brakes (yours doesn't). Hauling the car down from its front-straight top speed of, say, 99 mph takes all of my faith and my courage. It's a boundary limit to any additional high-speed development at this point.
The car is a blast to track. But pretty much any other BMW or Mini, with any other driver that has even two-thirds my skills, will eventually get a point-by from me.
Not to say it's a slow car. On a tight track like the Jefferson Circuit, my lap times are about 5 to 10 seconds slower than my lap times with my 420hp E92 M3. (I will try to post two session videos, one with each car, on youtube soon and post a link in this thread). But it's still slower than everybody else's toys these days, if it bothers you.
I'm pulling for you to turbo this car and make some noise! But if it were me, I wouldn't spend a whole lot extra to get more than 150hp or so, unless you want bragging rights. And hey, what's wrong with bragging rights?
Although, as much as I feel duty-bound to finish the low compression 2.3 10v project that I bought/inherited, I am being drawn more and more to the dark side: 07K. 700hp might be enough to be entertaining for a car that big.
As far as the handling traits, I'm not worried about it as I cut my teeth on a 318ti, snap oversteer is a challenging thing of beauty.
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