The 8.3 is an outstanding engine. I have several in agricultural plait tforms, and once had one in a dumptruck. Most likely, the reason it's detuned is to spare the transmission. Is it an auto or 7 speed manual? If so, I'd seriously consider leaving it alone, as it will destroy the transmission if you get too carried away on tuning it. Also, looking at the HP rating, does it state that it is BHP or SAE HP? There is a difference. Stock timing should also be indicated on the data tag in front of the pump, much like the old Dodges are. Personally, I'd wager it just needs a little tuning, a turn or two on the AFC valve, and go with it. Also, there are mechanical reasons it could be doggy.... if a dump valve is stuck on the turbo, it will not perform as it should. A few gauges will tell you a lot. Being a '98, it is possible the timing is backed down a little. Being a State vehicle it is a possibility the dump valve is deliberately set low, or perhaps even the pump has been backed down or the throttle stopped moved out to prevent speeding.
As for running out of turbo, that can happen quickly. These engines have been tuned up to 270 BHP in the CaseIH tractors, such as the MX270, and up to 430HP in boats. But as you probably know, too large a turbo can cause problems, as well as too small a turbo.... Lots of things to look at and consider.