The standard engine is well capable of 350- 400bhp easily. A fella in England called Polo ran 460bhp with a completely standard Sr20 with the head cracked for a whole season. There are plenty fellas drifting standard SR20s in the 350-400 region. I reckon you would be better off getting a 2nd hand engine in good condition. They can be had very cheap these times.
It would work out alot cheaper than rebuilding your own engine.
Thats just my opinion if your only going for that sort of power.
As for the options you engine builder is giving you, Go with the first one definetely. No need for uprated liners unless you are going for absolutely crazy power. Conrods arent needed either. Im saying all this to you coz I hate seeing fellas waste money on stuff they dont need.