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As others have said a new engine installed and guaranteed by subaru for $500 is a no brainer, if you can score the old engine even better but if its been genuinly hydrolocked it may have done a lot of subtle damage and stressed components even the block, not sure i would want to rebuild it for boost.
Guys seem to be running more than 6 pounds boost on stock motors sucessfully seem to be able to run 10-12 fairly reliably, if you run more than that your going to need more than motor upgrade. to handle the power reliably.
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