@buksh
for these cars you're better off going for stroker kits, performance heads, cams and dual carbs,.. there is alot of power to be had from these engines but you'll have to machine the inside of the block for anythign over 1776cc and you'll have to address the oil cooling issues which arise with this higher performance.
also there is the issue of the fans which self destruct, for that you'll have to get a double welded racing fan which will rev MUCH higher than the stock fan.
the list is endless. main starting point is a good dual port block and a 1303 style gearbox (better ratios).
alternatively you can go for a turbo setup but you'll have to keep it on light pressure since the compression is (on average) 7.5:1 on most Type 1 & type 2 engines.
3rd choice is the VWrx setup which we've discussed before.
i've got tons of performance options so when yuo get back let me know and we can discuss further.