Cheapest and best upgrade to get you to 200+ HP? Drop in a 5.9L Magnum V8. You'll need the proper ECU for a 5.9L (the 5.2L ECU will also work if it's not the exact same), and to add the two extra injector wires.
You can also use the 5.2L (318) Magnum.
Try to get a motor out of a 1992 or 1993, those had slightly larger exhaust manifolds and for only 200HP, should do nicely. Supposedly, the 5.2 is 230HP (ref: http://www.allpar.com/trucks/dakota-1987.html