How about a 2.8 straight 6 out of a E36 328i. You can get a full car for less than £800. 197bhp out of the box, minor/cheap modifications can get you upto 250bhp, a decompression plate and a turbo kit would generate horse power into the late 400bhp and there cheaper to tune (£ per bhp) than any ford or jap engine.

Even the gearboxes in standard format can hold more than double the standard bhp.

Food for thought.