Remember, the 1.5 Block was used for the Grp. B rally car 037, this was the one which was super and turbo charged, this used a standard 1.3 block from the Uno turbo. Obviously this was a works build and works money behind it, with special cranks, pistons etc..... This produced over 600bhp, althoug rumours of use of NOx piped through roll cage tubes, and stored in fire extinguishers which were changed at every service.
Also BMW in the 80's used the standard used 1.5 blocks for their 1500bhp F1 engines, again a special works build, but using standard blocks. It can be done, you just need to throw enough money at it.
As for whether this guys one is telling the truth, we will never know unless we were at the rolling road sessions.
Also how can adding more power to a FWD car make it oversteer, surely theu meant understeer.