Hi,
while im no means an expert on Volvo tuning, i may add my 0.02. It is true that the B230, specially the ones up to 88, is regarded as the "weakest" engine of the B-series. Later engines (89 and forward) have bigger bearings (63 mm diam).
I would recommend you to find an 89 or later engine.

The B23 have better reputation for tuning, since it has forged crankshaft (and possibly pistons) and the bigger bearings.
The piston rods in the early B230 (85-88) are unfortunately rather weak and for high performance engines, they should be replaced with rods from 89 and forward (which are 7mm longer and thus need to be matched with the new,shorter pistons).

That being said, i would say you can take out up to 200+ hp in a B230 engine with good reliability. The key to doing this is *balancing*. As i understood it, The No1 killer is the unbalance allowed from the factory in the B230 engines. Blueprint the engine and balance the crank and pistons.
I have friends that revv them up to 7-8k without problems after balancing.

If you want more cc, you can replace the standard 80mm crank with the 86 mm crank from Volvo Penta (used in Marine engines). Fits right in.

Regarding the heads, the "531" type is the best for tuning, and the one most people use. Larger valves (intake 46-68mm, exhaust 38-39mm) and porting are the standard modifications.
There are also a few different cams you could use. Volvo have several "original" cams. I know that many rally drivers use the "VX" trim cam.

well, hope you may get something out of this. I dont know if all (or any) of the mods comply with your regulations, but its fun if someone wants to use Volvo hardware :)
Ah, i suppose the turbobricks guys also can give some advice as well.
regards/
Jakob