If you can source the K04 turbo'd version you'll have 225bhp to start with, and anything around 260-270 with a simple remap. I had a TT with the 1.8t and it was a really nice engine, shame the car itself was a bit boring though. If the k03 version is all you can get, and its cheap/free then go for it - will still provide good power, just runs out of top end grunt.

Quite a few kit cars now use the 1.8t engine, so maybe worth contacting some of them as they could probably help or supply parts you need.