there's a thread called budget engine build, check it out you will find good information.
for your engine there are quite a few modifications you can make but it all depends on the budget you have. you could build a metric mechanics for 7000$
so let us know what you're after and we might be able to help you.
by the way, take your time to really understand the engine before you buy anything expensive. you will find lots of information on the forum and feel free to ask any questions
also, there are plenty of mods that dont involved messing around with internals that would bring your car to life: sway bars, suspension, lighter flywheel, chip...
check this site
http://www.metricmechanic.com/and this one
http://www.r3vlimited.com/Tech/318is.htm