The stock pistons are cast eutectic aluminum, as are almost all OE pistons.
The stock rods are cast iron or cast steel, I'm not sure which.
Both of which can handle over 200hp. The weak points are the rod connecting hardware, then the rods, then pistons (if you have a proper tune) you will blow through many transmissions before killing engine internals, if you are doing things properly with the engine.
The lash adjusters / springs start to pump up/float somewhere just above 7200 RPM.
You can run more agressive cams with the stock bottom end without any issues. But there are a lot of cam options, and some have too much lift for the stock valvesprings. Do your research before purchasing one! The bore to stroke ratio is pretty even on the 1.6L so it likes to make its torque down low, there's not a whole lot to be gained up top without spending $$$$$
Also to note: these are not big V8's that pick up 50-100hp with a new cam. You may gain 10-15 hp. MAY. That money could be well put towards an XR2
just an FYI, around $500 in mods on the XR2 will put you in the 160+whp range