John, you have to understand that the "Fiesta" in question has about as much in common with a stock Fiesta as my last build does with a Saturn V. It's also 4WD, and built out the wazoo for the sole function of making kick-butt videos like that one...
Oh, and FWIW, the stock Fiesta is only 120 HP, unless you're considering the ST model (which is rated at 197).
Oh, I understand that this is *highly* customized. I'm just trying to figure out where they found the room under the hood to cram that much engine. I used to carpool with a guy that drove a Fiesta. There just isn't much room to work with.
You don't need more engine, not in terms of physical footprint. Rather, you need more turbo. That and all the other detail differences that eke out more volumetric efficiency from an engine. And most importantly, the $$$ to do it. Ken Block not only has plenty of that, but also a direct line with the manufacturer's performance engineers. Bottom line is that it's not impossible (far from it) to make a small displacement engine turn out big numbers. Its also not cheap, and generally not long-lived. It helps that the standard 1.6L motor has the same exterior dimensions as the 2.0L version, so the 25% bump in displacement makes for a better starting point with no space penalty.