I've often wondered, about shoehorning an L28 into a 120Y (with the obligatory firewall mods!) but in the real world you can't go past an atmo, alloy, EFI V6.
Going by the current code of practice (note we do not use the NCOP) here in QLD
http://www.tmr.qld.gov.au/~/media/b3e ... ghtvehiclesreductions.pdf the largest allowable is the VQ20DE which is light,compact, and makes a (relatively) impressive 150hp. There are obviously other options but they are no good due to availability, cost, or legality.
As for different states or countries, you would need to check your local regs.
If you could get a VQ25DD or something like that done legally, it would be awesome.
In my case I would probably just go an L20.