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There is nothing intrinsically wrong with the rear drums:
+ve
1) Low/moderate speed braking they are more efficient than discs
2) Good hand brake(parking/emergency brake) function.
3) Unaffected by rain or spray
-ve
1) Retain heat with repeated applications that accumulates and ultimately causes fade.
2) Retain water when driving through shallow streams/fords.
3) Requires periodic adjustment
For normal day to day driving a drum braked rear is a good option. However, for quick driving where repeated application will ultimately see the brades overheat and fade the disc brakes are the preferred route. Disc brakes are not so good as hand/parking/emergency brake nor as good with slow speed work. The 160bhp you envisage will probably not tax the day to day use but anything competitive will be close to the limit even with competition linings - they bring their own concerns as well. The type 3 drums are a standard upgrade on the bug and would offer a noticeable improvement.
A bug requires around a 50/50 brake balance set up since the front end has only 35-40% of the static weight, that means that the caliper sizes should be equal front/rear with the standard master cylinder.
Using a Porsche set up front and rear is near to an ideal solution since you can tailor the caliper sizes to match the balance you are looking for, big powerful brakes are standard and the handbrake is a drum that is efficient. If you are intent on a fine handling/braking super then substitute a 944 front/rear suspension and brakes.
Clive
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