the project car (need advice)

Alright so i'm a little tired of just owning a stock car and I'm looking into moding out a bmw.

I need some advice on this people so no stupid replies please.

the set up
1990 bmw 325i with 100k on her (yes I love the older style)

Now my goal would be to make ~400hp with a turbo and no NO2. I personally dont like the idea of spraying but to each his own. So lets just talk motors here for a bit, ok?

I have two options now that I've been informed not to bother turboing a M3 motor. They are:
1- rebuild the 2.5L 12v inline 6 to handle a turbo
-currenlty produces 160ish hp
2- bore out the 2.5L to a 3.0L and rebuild to handle a turbo
-would produce about 240ish hp (friend has already done it)

Right now i'm guessing I would be running around 15psi - give or take a few psi. This car still has to remain a daily drive so I would not always be running at full boost, nor will I be racing her around down all day.

I'm going to need to rebuild the motor either way, is it worth boring it out? If I dont bore to 3.0L what kind of step up will I be looking at?

As for the car, shes in mint condition and in a shop right now getting a fresh paint job...