a modified HX40 is nice, but they're pricey! my stock HX40 is a little laggy, but not TOO bad...
I think a 16cm non-wastegated housing would flow better under most circumstances than a 14cm wastegated, and it's considerably cheaper.
and no, it would not be foolish to just put a larger turbine housing on the stock turbo.
it really depends on what your definition of "manage" is...

the HX40 will allow you to USE 400hp easier than an HX35, but you'll still be able to use it w/ a 35, just not as long at one time!
also, an HX35-16 is a totally different animal from an HX40-16... it'll spool up considerably quicker, and you'll be fine with an 1800+ RPM stipulation.
Forrest