First of all let me tell you the "H120" engine was actually 105 BHP. Based on your criteria, Brian Holm (of this board) has done what you desire and then some. He has taken a 1725 engine, fuel injected and turboed it, added a T5 5 speed and is very well beyond 150 BHP (if he would only dyno it).
There is a lot of potential in a 1725 engine, dont let anyone fool you.
I don't doubt that I could get 120hp out of the 1725 engine.
But as far as I can see, the only thing tuning the existing 1725 engine has going for it over a Miata engine swap, is that it's more original.
For me, fuel economy, low emissions and easy to find spares outweigh originality.
The only thing that would prevent me from using the miata engine is if it requires major surgery to fit (which I need to do more research on.)
I also like that I get a 5 speed trans with the Miata and with a bolt on turbo kit can get 30 more hp without a lot of head scratching.
A low mileage 1.6 engine and trans are about $700, so it's cheap to boot.
If you think this swap doesn't make sense, for reasons other than originality, please tell me why.
Thank you for taking the time to post in my thread because I want different opinions to make an informed decision.