I wouldn't be afraid of 120,000 mile either, a properly maintained 5.0 can run quite a bit longer.
Having a flywheel hp goal is really not the way to go. Since with the motor in you'll never know how much you actually have. Pick a rear wheel number.
With Heads, Cam, intake and all the fuel necessites you can probably make around 300 rwhp with you 120k motor.
Enjoy it while you can, meanwhile have a block done up to replace yours when it goes.
I know people with 250k+ on their engines that don't burn a thing.
I know an AOD wastes a bit more hp, but 175 seems kinda low especially since it has full exhaust. If i remember correctly a bone stock 5-speed makes about 190hp.
You may be in need of a fresh tune up.