Get the head decked, redo the timing chain (new guides/chain), ARP HG + Studs, and keep the original motor. The HG always craps out from a bad overheating episode, check the back of the block for a oil leak (easily confused with a bad valve cover leak).
Keep the original motor and supercharge it once you get bored of it. 210whp in a 3100lb car is stll quick enough to run down faster cars. You can get them up to 260~ whp with cams/intake manifold/tune ($2000). Do that, Stewart Water Pump, Z3M S54 3-Core Radiator, and new OEM Thermostat/Expansion Tank/Thermostat Housing/Hoses and you'll be able to romp on it all day long and drive back.
Euro motors aren't drop in and go, there's still some degree of wiring involved. A S54 will be cheaper with all said and done. I still feel a built stock motor (headstuds + gasket) + Vortech/Dinan S/C kit and intercooler off the classifieds is your best bet for a reliable, simple 300-400whp on these cars. Get a conservative tune and do your cooling system before all.