There's a few of us have done exactly that. Our last one was 240cc IIRC and used modified Wiseco 61 (or was it 61.5mm ?) Kawasaki pistons. we used a CB200 head with better valve guide seals than a 175 and bigger fins, but the ports are almost identical to any later type (vertical) 175 head.
We welded and machined the head to get higher compression with a low dome piston, but there are alternate ways to do it.
With a short stroke motor, it has the potential to rev and needs to rev to make enough power, but poor valve train control and a 360 degree crank hinder that.
Think about a 180 degree crank and slipped cam chain guides. For carbs it depends on the rules. I have used CB77 (26mm) carbs on a 175 cc motor and CB750 carbs (28mm) on a CB77 350 and 26mm mikuni VM series on the 240, but Keihin CR are probably the best if the budget is generous enough.
Our 175 made about 21hp and a good 250 should make around 30 at which time the frame will twist, forks will be inadequate and reliability will start to suffer but that comes with the territory. Frames can be braced, there are better forks and wheels available, so go for it.
I'd be interested to see what pistons you end up using. I don't like old type high dome pistons, so I tend to machine a squish band and match the cylinder head squish angles which also need to be changed. megacycle do some great camshaft grinds.
Where are you located and what are the rules for your local Vintage race organization?