that big of a gap? that seems quite large, perhaps there are too many base gaskets on or something? Changing the base height changes your port timing, so you have to be careful doing that. if you put your piston at bdc and the top of the piston is under the lower edge of the transfer ports, it could be too high.
Porting a cast iron cylinder is pretty easy and more forgiving than chrome and aluminum. Get some fine dremel stones and widen the exhaust about 2 mm on each side and about 0.5-0.7 on the top. Draw the lines in first so you dont loose track, do all your measurements with a calipers. You should at least read jenning's section on it and feel like you understand it, before you try.
Dont forget to clean out all the grit and metal shavings before putting it back on.
That and a clamp on 2 pc biturbo should make for a pretty solid 35. Dont forget to up-jet. The encarwis are super easy to get at the jets, and they use bing jets.