you are totaly right,
that's why i would go for an m52 or s50, but if you really love the four cilinder there are ways.
but the question was if it was possible of course it is

go to m42club.com they have loads of advice how to tune the m42, and for the person how said that it would never be faster then a 325i they have m42 there with 200hp :mad: if i remember correct, you need a m47 crank fit it to some s52 piston and a slight overbore and you have 170 ponies, ad schrink ...