I think you should be going for just a turbo or stroker.
V8s and V12s are stupid heavy.
Use the E30s agility to your advantage!
Get something else for high speed cornering.
There are plenty of options, sport bikes, supras, muscle cars, E36s, and etc.
I think 300-400 whp should be the maximum, you should be more concerned about making sure you don't have too much weight over the front struts.
700 whp should just be no-tractionville.