Well it looks like you're serious about this...
You're going to have to replace all the internals, that's a given. So get together with your mechanic buddy and start figuring out what you can afford. Off the top of my head you will need:
High compression pistons
Lightweight/knife edged crank / possibly more stroke if you can't get enough volume via boring
Custom grind camshafts with upgraded valvetrain
Forged rods
Fuel system & Injectors
Boring the cylinders / sleeves
Custom Intake or ITB's
This is actually a really neat project and I hope you go through with it.
GOOD LUCK!