2 Months late. Welcome to the forums. I cut my teeth in performance on a YT175, 1983 to be exact.... Still got that machine.
Don't worry about modding the stock gasket, your going to need it. Be sure to do a leak down test on the motor. Any air leaks will toast the motor fast. It looks like it already suffered a lean condition from an air leak (piston damage). A big enough air leak will make it damn near impossible to start. A leak down is simply pressuring the motor to about 6 psi and seeing if it holds pressure. Cap the exhaust and make a special fitting to put air into it. Some youtube searching will point you in the right direction.
If you want to make more power, there's plenty of ways to do it with these motors. They are corked up pretty bad from the factory. Simply changing the carb to a Yamaha blaster carb (rejet while your at it), porting the cylinder, and exhaust pipe will make a noticeable amount of power. Easily double whats available.
The mods depend on how you want to ride and where you ride. Trading bottom end power for top end will make it hard to get these rolling thanks to the centrifugal clutch. You can increase the clutch stall for the trade off of clutch life. The stall gives you a higher rpm before it starts rolling.
You can cut about 40 thousands off the head, then round out the cut marks on the head. This will give a nice bump up in power. 32:1 is the recommended oil mixture.
I just wanna go fast. If your not first, your last!!
Reproducing the Tecate CDI. Contact me if you need one. I'm most accessible on FaceBook. You can find me on the 1984-1987 Kawasaki Tecate KXT250 Group.