Ive read quite a few people try and build the M40 engine on bimmersport.co.nz and only result ive ever seen is running it on mild boost. pretty much anything else you throw at it won't do anything.
My advise if you want to start chasing power is convert it to an M42 and go from there.
but none wants to hear a DOHC 4 cylinder with a big bore exhaust any more than they want to hear a SOHCer.
with that said though 130-140hp is only around 20hp more than stock so a realistic aspriation. i see in the other posts you have made that you are quite good with maintenence.
Alternatively, why not disregard all of this and throw in a shorter diff ratio? that will give you more acceleration and more perceived HP. economy may suffer a bit but its a 1.8L so pretty good already
hope this helps