If you are going to stay naturally aspirated another option is to get a new shortblock from Subaru. $2200 10103AA360
Get an engine gasket and seal set from Subaru. $240 10105AA060
Have your buddy do a valve job (valve seals included in gasket and seal set).
Get a camset from me. $870
http://www.ecutune.com/svx_camshafts.htm
Get a timing belt/idler set for $169 from these guys:
http://cgi.ebay.com/ebaymotors/92-97...Q5fAccessories