hello and welcome!
i remeber reading sumwhere that sumone had a mk3 tdi with original engine running just over 200 bhp proven by various rolling roads round the contry but that was serious mods for ex: hybrid turbo, injectors, nitrous, cams, pistons etc so you would deffo need to get a bigger wallet but it can be done, ive your lucky with the bay you might just squeeze it in you budget.
would love to see this project unfold! gd luck matey