Even the $12k Metric Mechanic M42 does not make 250HP, and it is basically the most power you will reliably get from an NA M42 while still having a nice smooth powerband. Your budget will not get you a turbo setup that makes that much power for more than about 5 minutes.
Sorry, the M42 is an aging platform that just doesn't have budget-friendly mod potential. A reputable chip and 11lb flywheel do wonders, but it will still not be a drag champ. They are fun older cars with a (generally) older enthusiast base than a lot of other cars. The same could probably be said for E30's in general, but the 318iS seems to attract older people that are looking for a fun ride, not a "blast your girlfriend's shirt off" car. I mean, I am still ALL for that and all, but the 318iS isn't the machine for it.