[vujade]

I think that the problem you are experiencing is there isnt to many people that know how to make a HiPo Stock Fuel Injection Motor. I beliebe the stock FI is a very limiting factor.

Maybe some of the VW mechanics can validate this, but if you a have to keep your 1600cc motor, maybe you can bump discplacement up to 1679cc via machine in 88mm Pistons.
then maybe throw on some CB performance 044 heads with larger valves, maybe some 1.25:1 ratio rockers and a better ignition system. If the Stock FI could handle it, that should definitely get you the HP you are looking for.

Let me ask you this?
In NJ, is the inspection a Visual inspection as well as a smog test?Well if you want a Type 4, why not convert a 2.0 T4 using the Cali method?
This way you can use all you stock Type 1 tin and cooling and you will still appear to be using a 1600 Type 1. It is very hard to tell that it is not a Type 1 using this method. Only visual difference is the exhaust ports on the bottom of the heads instead of the sides like a Type 1.