The Mk2 1.6 engine is about 75bhp right ? And the later Mk3 1.8 engines were 90bhp (early ones were 75bhp, like the AAM). So 15bhp difference. But the Mk2 is lighter and even with stock suspension will handle better, which is great for having fun on the twisty roads.
You can mod the Mk2 1.6, swap to a weber carb and swap the cam for starters, but it's not worth spending too much cos you can buy a 1.8 8v GTI engine to put in it for very little these days.