Here's the thing, though, Danny. If Pat Downs can build a streetable 2332 Type 1 to 200 horses—and I believe he does this on the regular—why should it be impossible (or even especially difficult) to build a 2.5 liter Subaru to 220?
As you say, the Subaru is a much better platform out of the box. The overhead cams and 4-valve heads would appear to present no flow impediments.
The compression ratio can't be raised? Really? Then how come the Japanese cars get 10.7-1 and the US version gets 10-1?
Balanced pretty, port-matched with a good header and free-flow intake you'll see gains. You'd have to.
Don't get me wrong: I agree that the stock Suby is already tuned to a state that's much closer to its max potential than any air-cooled VW ever was from the factory. But it's hard to conclude there's not at least another 10 percent in there.
The keys are obviously in the ECU though. Spark advance, A/F and knock-sensing based on the stock CR and cams will have to give way once the lift and duration are bumped. I don't believe the guys building these engines and aftermarket 'puters know enough yet to get everything they deserve from these builds.
And as for your position that 220 is too much of a good thing for @Chappy (or anybody who is not Sébastien Loeb)? Thank you. It means a lot more coming from you than it does from me.