207 1.6 120 bhp - best performance gains???

It won't make a noticable difference to your car, your money is better spent elsewhere.

A fast road cam would make a big difference, and gas flowing the head will allow you to maximize your air/fuel charge. Leave this to a professional though with a proper flow bench and machine tools.

A remap should give about 10% more power and is worth considering as a final mod to fully realise the potential of your other mods.

Most depends on your budget really and how the car is going to be used. If this were my car iId focus on improving the handling, dropping it a little on stiffer suspension and fit a fast road cam, remap and fit brakes from the Peugeot sporty models.
 
Greetings and welcome to our TorqueCars forum buddy ;)

If you place the induction kit under the bonnet then just put a heatshield around it. There are generic ones on the market which might save you time and money. If your handy with the tools then make one yourself. It would be of benefit to fit the inside of the shield aluminium/stainless steel with a heat reflecting foam or similar product. You can off course fit the kit elsewhere depending on space, in the wheel arch for example!

An example of the one I made a few years ago.

 

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