I am thinking of getting a new exhaust. I'm getting 2.5" pipes from the resonator or should I go from the cat? What kind of headers would directly bolt on to the 1.8L SOHC 1st gen engine?
I'd like to improve on the low to mid range of the engine, what kind of mods should I do/be looking at?

 

2.5" exhaust is too big - that's turbo territory!! you'd be better off going with 2" pipe from the cat back.
The only headers for the SOHC that i know of are listed on GroHarlem's 1st gen site....

 

What does that do? What's the process involved in milling the head?

 

aka shave the head, or deck the head. means to grind away metal from the head on the side that bolts to the block, making it shorter, thus decreasing combustion chamber volume and increasing combustion chamber compression, increasing power by said combustion chamber. usually only few mm's are shaved off, but it can make dramatic changes.

 

so is this something i could do myself (im a computer geek not a car geek)

 

Find an engine shop. A dremel ain't gettin you nowhere. $$$$ very pricey.