honda cb350s are pretty cheap and great bikes. lots of mods. whatever you do, find something titled and running.
best mods are to get rid of weight. get rid of whatever you can... removing the electric start is a good 10 pounds with out all the wires. ditching the stock air box and covers can save you another pound or two... rear fender weighs a ton, as well as the front.
good upgrades include a front end off of a cb750 (disk front brake) and a set of good tires. electronic ignition does wonders, as well as ditching the stock, heavy, restricting headers and mufflers.
you can spend lots of money for a few horses, or half as much money to chop off 50 pounds.
bracing the frame and chopping off side cover mounts and things is a good idea also. look at the 50 dollar mod thread.