I would listen to the rebuild shop. Boring the block can leave you with thin spots that could lead to future failures. As for H/C pistons and shaving the head, that will up the compression ratio and you will probably have to burn expensive premium fuel.
I would suggest pulling the head and examining the valves. If you don't have any burned valves, just have the valves ground and reseated, and replace the valve guides if they are worn. Usually smoking on startup that goes away after the engine warms up indicates worn valve guides. If it smokes all the time, it is probably a case of worn out rings. If the cylinder walls are not scored, just hone the cylinders and put in new rings.
For a little extra power, a header will give you the most bang for the buck. A K&N air filter setup will also help.
Beyond that, put your money into a moderate lift and some reasonable tires.
When you are on the trail, ground clearance, reliability and driving skill will get you much farther than horsepower.