Exhaust Question
I agree with the 2 1/2 inch exhaust. You may want to look at an X-pipe instead of the H-pipe though. The X is a little better and costs about the same. The noise from the turn downs will be a little better to. I would think that a set of magnum heads, a cheap intake and a proper st of push rods would be a better combo in the long run over the J-heads and possibly a little cheaper if you left them stock. The 1.6 rockers would help in the lift of your cam if you went this way.
Jack