95 Mustang Engine Swap Questions - Cali Specific

Hi all, I recently bought a 95 GT 5.0 as my first project car. I have been toying with the idea of doing an engine swap for a 351w that I would rebuild from the ground up. However, I know that doing this swap in a GT would require replacing the fuel lines, the wire harness, the transmission, and getting the engine lower in the bay. Alternatively, I was thinking of keeping the stock 302, boring it to 331, and rebuilding it with performance parts.

My application for the car when I am done will be primarily daily commuter over a windy mountain highway, but I also want to be able to track it and possibly enter some amateur races. The end product which I am looking for is a balanced car that can handle turns, and accelerate quickly; I'm not as interested in top speed because I would probably never touch it. The biggest thing is, I need this car to stay CA smog legal but still get as much performance as possible.

Here are my questions, for a first time build would dropping in a 351w be biting off too much? Would the HP difference really be worth it? What complications would I be looking at with a swap because this car will need to be CA smog legal? Keeping everything CA smog legal, what kind of HP could I realistically hope for out of both engines?

Thanks!