EXACTLY. You seem to share the exact same thinking as me Qwerty (pretty much what I was going to post!)
You have to decide what you want, and how much you want to spend - then work out how much cash you ACTUALLY have to spend, taking into account all the other things along the way (repairs, servicing, etc etc). Everything adds up.
I know having worked heads can make good power, and it is definately a needed thing when you want to run larger turbos etc. I have a few friends that have gone right down this path as well. It costs a good amount of money, which is why I didnt go that way. I couldnt afford it. My build is very budget - for those that have seen my car, it may not look like it, but it is built on a fairly tight budget (and I have a lot of friends/supporters to thank for that).
For me, reliability was the number 1 priority - as Qwerty said above - I cant afford to rebuild an engine all the time. Unfortunately its a Subaru, and I dont care what anyone says, if you regularly race a high HP Subaru, it WILL break, seen it all before, and then there is the issue of all the other things wearing out/breaking quicker - again, I didnt want that stress cos I wouldnt be able to afford to keep going... at the end of the day, what good is a race car if you cant race it?
So basically do what your cashflow will allow, and what you are happy with. If you can find some AVCS heads for a good price, grab them. 200-240kw seems to be a good all-round amount of power without running into too many issues - and the main thing is, the car will still be very DRIVABLE. Past that, I reckon is "open your wallet" territory!
And Funky - I am by no means a top driver, just done a fair few laps, and the car is far better than I am, so thats where the credit can go