Just take your pistons and send them in to bet profiled. Then drop the compression. Should take 6-8 weeks and any good machine shop should be able to cc your combustion chamber and tell you how much needs to be removed to drop the compression ratio. Those are 10-1 engines. The crank and rods will most likely support those hp numbers. We have made over 700 w/tq on stock om606 crank and rods and pistons. Rods finally bent but the rest is rock solid. The m104 shares the same basic setup. Rods are a tiny bit smaller with smaller piston pins than the diesels. But if you wanted to just get it over with you could do rods at the same time.
Good luck. Sound like fun. I think the headgasket is going to be the hardest part. But I think it is doable. I certainly am going to turn mine up some day and see.