$4K comment was just an amount thrown out there...I think that number came up when he mentioned throwing $4K at a 1600.....I made a post about this on The Samba a while back on this:
http://www.thesamba.com/vw/forum/viewtopic.php?t=119643
I don't think the water box conversion is too much a big deal in terms of suspension tuning/replacement. I mean you're adding what, weight of what another person weighs to the car? That's hardly worth noting if you have the power to compensate for it. Balance isn't too far off as far as what I've read from the shoptalk forums. Cooling hasn't been a HUGE issue, but it didn't seem anything out of the ordinary...
But like stated you said 200HP is far more than what you need, then a GOOD BUILD 1914 or 2L Type 1 is probably the best bet....a buddy of mine has a 1914 that can lift the front wheels of his bug off the ground, and in terms of maint, all he does is change the oil. His 60-100 is INSANE fast, but he said he'd never CRUISE at anything over 80....
I think it's pretty sad how you spend all this money on a bulletproof motor, have all the power there and you have the ability/power to sustain 100MPH, but your motor doesn't have the cooling capacity to sustain over 80mph. Kinda ***-backwards IMO....