The M20 motors aren't puny little econoboxes or alien-designed mystery machines. They're just basic, strong motors that work well just as they were made to do just what you need them to. That said, it's not all that easy to go putting parts onto, in part because they are German, and therefore engineered beyond most of the rest of the world's engines. Also, because they aren't as inexpensive or abundant as lots of other cars, not as many manufacturers make parts for them. These cars require a more in-depth working knowledge and more consideration to modify than your buddy's GSR.
You, ldsbeaker, have the weakest inline-six BMW put into an E30; even some of the 318s have more horsepower than you (and I - just imagine your car with two more doors). It was designed to be a total fuel miser, but still be easy to drive around town (hence the relatively monstrous torque). If you were looking for a sports car, you've made a mistake. But now that we're here, there are ways to make the B27 fast.
In short, the most effective way to yank serious giddyup out of it is to fuse its low-end (crank and whatnot) with the 325i valvetrain and top-end. For a few hundred dollars, you can find a running M20B25 from a junkyard, gut it, and piece together what could emerge as a stroked 2.5i with 325 power and rev strength plus an Eta's torque. Best of both worlds sort of thing. From there, you can fit a 325i exhaust system (to the 325i manifold), which uses a dual-inlet muffler (hawkmoon36 - Brullen mufflers sound awesome, but SpinTechs aren't as expensive or hard to find). Spend another thousand bucks on suspension, take out the sound-deadening and air conditioning, and go murder yourself a couple E36es.