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I wouldn't willy engine it, would make it too much like all the other mk1s. Do something interesting and imaginative like a K4M on ITBs, or a turbo's 1.2 16v (D4FT)
had a look at one this afternoon, looks pretty smart actually. Seriously good camera. Prefer my htc, but i can see why someone would choose one of these
I "think" this sounds like a valve head failure. Fairly well known problem if it is that. I dont think the F4R likes holding high revs as it seems to be when they're over revved that the valves break