The M50 is a larger motor with 2 extra firing cycles, it will make more TQ so therefore more HP far easier.
Nothing wrong with Iron blocks, I don't think that's what he was getting at. He's just trying to say the M42 isn't stressed at all in stock form. I have no doubt that you can make 200-250whp on an M42 with a stock motor (I would personally lower CR with a Cometic gasket and put in ARP head studs at a minimum though).
Of course the M50 will make 300whp far, far easier. My M52 made 330whp @10 psi with 4 degree's of timing thrown at it. It later made 380whp with proper timing and one more psi of boost.
E36 · DYNO · TUNING · WIRING · PARTS