You mean the compression is too high, because low compression is good for turbo and S/C charging. I have heard of a few people turboing their 318s with good results, but I have also heard of people swaping motors with M3s and other engines like a 330 or something els with better results. So what it comes down to is how much power you want? If your not going for huge numbers then get the turbo which would be good for a good 50% increase in power maybe more depending on how much boost you run. If you go that rute Im guessing you will need to rebuild the bottom end of your motor if you want to run high boost, like pistons, rods ect... Now if you want like 250+whp I would go for a swap, but mind you dont go for too big of a motor because part of a BMW is all about handling. Maybe a 325i swap because remember you have a little car so it dosnt take much to get you moving. Thats why I feel turbo is your best beat. Its less of a hassle, cheaper because if you do a motor swap you would probably turbo that motor later to get the big hp numbers. And its less work! Remember Power to weight ratio! Your car is light, 200+hp will really get your car moving. A turbo will put you deep in the 200hp range so I think that would be the most cost effective way to get your self a very fast 318is. Check out
Cardomain.com their are some turbo 318s there with pics and mod lists. Im sure some of the owners their could help you.