Unfortunately, being an "eta" (325e) you will have a low revving (= low hp) car. You will have to do something like an engine swap or the like in order to use a turbo effectively.
Your speedo is controlled by the "SI board" search for that on www.BMWe30.net
, or here for a writeup. YOu might either need new batteries, or a new board. Not a big deal to do the batteries.
Your car has 121 hp stock, and the most hp increase you'll see is from a chip, they usually open things up quite a bit. (quite a bit meaning you might get another 15-25 hp, I think)
As far as HP limits, if you know anything about HP, you know that it is directly related to Torque and RPM, the latter of which, the eta does not have. You're kinda limited. (R3vlimited, that is... haha)
You have a few options:
convert to an "i" engine (168 hp, much nicer to turbo), do a newer engine swap (M50, S50, M30, S14 (gasp), or S38 (double gasp)), or you can get a numerically higher differential (get LSD while you're at it) and your car will feel a bit peppier. (3.25 or 3.73 are popular; 4.10 is really high, but you'll kill your top end speed)
Some really good places to go for E30's are www.r3vlimited.com
, and www.e30tech.com;
the people are really knowledgeable, have really great ideas, and they have made most of the really stupid mistakes already, saving you the trouble.
all of this is my opinion, as well, I am by no means the final authority.
Go Midwest! My fam lives in MO.