long tubes, H pipe,
flowmaster 40,s i think at the back of the headers havent actually looked
In that case, I'd definitely look at that gasket. It's probably leaking. I've also had the nuts that hold the midpipe to the exhaust manifold come loose, so make sure they are tight.
As for the heads and cams, it really depends on what you're looking for power-wise and money-wise. If you were really set on making NA power on a street-driven 2-valve, I'd get the MHS head/cam combo package (found
here; it includes EVERYTHING, and they're already degreed. I'd run it with MHS's PI Stage 2P cam. I'm sure that combo would make over 300 rwhp easily, and should run deep in the 12s, all with good street manners. If I was building an all-motor daily driven 2-valve car, or wanted a good setup to make bigger power in the future under boost (500-600 rwhp), this is what I'd do (except put a set of blower cams in instead). The only thing is that it costs $2400, plus labor (assuming you don't do it yourself), plus a tune ($400+).
If you just want a little more horsepower, just a set of cams (degreed in, of course) would net nice gains. MHS's PI Stage 2 cam or Hitech Stage 2 cam will make good power (285-300 rwhp), and I personally know of a couple of people running well into the 12s with full bolt ons, Hitech Stage 2 cams, and stock heads. Cams+degree+tune will run in the $1100 range.