It all depends what you are willing to spend for "a bit more" power. If you are hoping for more than 160+whp, then you might be better off going F/I or swapping a larger 6-cyl in. These options can get complicated and expensive a lot quicker and I would not recommend them.
If you enjoy the balance of the car with a 4-cyl like I do and just want more pep, you can always get some cylinder head work done/cams/lightened M20 flywheel/shorter ratio differential. A hardcore option is to do the M47/M44 crank in conjunction with S50/M3 pistons along with all the listed items above.
I bought the 318is for balance, not brute power. The M42 is a worthy investment if you just want to liven it up. But do not expect it to have much torque or large power gains per dollar. However, with very few mods it's very possible to make higher-class/overpriced cars feel terrible at the track when they point-by a 1.8L POS. Just ask 2002maniac what I mean by this...
I would suggest some more cost effective/fun modifications. Investigate getting a lightweight M20 flywheel, a less restrictive muffler, chip, track-oriented suspension, and a bucket racing seat with a steering wheel. This will net you a lot more fun points when driving spiritedly. You get to full-throttle when exiting most corners at the track. To me, that's more fun than having 300+whp and being at 1/4 throttle all the time.