I have first hand experience of doing what you want to do, I am currently working on my second punto engined 500. The first had an 1108 in a fairly standard state of tune running on a single carb, the latest has a 1284cc engine running twin 40's on a custom manifold and a custom 4into1 exhaust.
My advice would be, think very carefully before you start down this road. Your 500 will be worth the most if you come to sell it either as a standard looking 650 or an abarth replica, you can get good power from a 650/700/800cc air cooled but 50bhp on a road engine will be about the practical max with some of the race engines in Italy putting out over 70 bhp.
The Smallcox turbo route is well worth considering as its easy to return to standard if you want to maximise resale value. He is getting great power figures, much more than a standard punto single cam engine but the pay off may be reliability and engine life.
If you do decide to go for it and want to avoid having to take a BIVA and ending up with a q plate, then you need to avoid cutting the monocoque and work within the DVLA points system. On the first car we put the radiator where the spare wheel and battery normally live and cut big holes in the front panel and inner panel for air flow. On the latest car we are mounting the custom made radiator in front of the front panel covered by a 600 abarth style fibreglass cowling.
With the new car we want to be able to remove the cowling, radiator and engine and slot in an air cooled within a day to allow us to use the car as an abarth replica in long distance rally's or if we decide to sell. An engine swap car will always be more difficult to sell and worth less than an Abarth tuned air cooled.
If you want to do a conversion properly, be prepared to spend a lot of time and a lot of money and most importantly, be sure that you can see it through before you start.
Have a look at my website
www.retro500.com for some inspiration and if you decide to proceed then I will give you as much help as I can.
Nigel