For 500hp you will likely want a larger displacement motor unless you plan on running high-octane race-fuel every time you want to play around. One option is the RB30DET which is an RB30 with an RB26 head. Seems a bit extreme to me too!

but there is NO reason to purchase an SR if you are just going to be replacing most of the components anyhow.
Honestly, take the stock KA motor in it, rebuild it completely with some necessary turbo toys (your friend seems to know what is required) and shoot for a 300whp 94 octane daily driver. You will only really need new pistons and a decent tuning job to hold a good amount of boost. This topic has been beaten to death but its a very good route to go.
I would also suggest you pick up an "se" version (in the states that is the luxury model) because you will want the 5-lug hubs and the stock VLSD.
Good luck! if you want to catch me on msn my addy is
preludeguy2000@hotmail.com