Best for what? mileage, longevity, cost, time, availability, weight, torque curve... it goes on and on. Depends on what you really want in the project. Cool factor will be higher if you use a diesel, that's all I know for sure...
^^^
What he said, with what I've highlighted being the deciding factor, ultimately.
Simplist to transplant (and probably to find) would be a 1.6L, then 1.9L, then AHU/1Z 1.9L TDI , then ALH 1.9L TDI in that order. In my opinion.
All can be made to produce substantially higher power than stock. Searching & reading on this site will gain you days of important reading material, starting with things like:
http://www.vwdiesel.net/phpBB/viewtopic.php?t=579Actually the whole FAQ forum is a great place to start. Cheap/ free power increases to start with, then the sky's the limit.
If time & money is no object, you live for frustruations and aggrevations & look forward to challenges, import something exotic from Europe like a PD150 and make us all jealous
Ok but what engine would be the best or good to get plus what kind of power are we talking about?
Relatively easy to get 100hp out of 1.6 or 1.9L (tuned pump, add intercooler), and 130hp out of 1.9TDI (chip & injectors).
Start seriously changing & upgrading parts like turbos and >150hp out of any of them.
Of course, all of the above with LOADS or torque.
How much time & money you got...?
Then, how much longevity are you willing to sacrifice for power?
Will you be racing, daily driving hundreds of miles, will this be a gagare/trailer queen?
Lotta variables you have to let us know before we can say "This is exactly what you need..."