Anyone have any recommendations of performance parts to put on one of these engines? I already have a cold air intake but I'm not sure in what direction to head next. Help please!

 

The 5S-FE is not a performance engine due to its head design. There are after market camshafts, turbo (works well), headers, but otherwise not a whole lot.

The engine was designed for MPG and daily commuter driving.

 

Should I put a new transmission in it? Currently it has an automatic? My friend says that if I were to put a turbo on it now then I could only run 4 or 5 psi, but if I switched out the transmission then I could run more.

 

Not the turbo expert here.

5psi is good enough if you want to keep the engine from breaking rings, etc. The trans should be OK, install a second trans fluid cooler. This should give you over 150 HP at the tires.

About 8-9 PSI seems to be the max boost and still have OK engine life.

If you do go the turbo route make sure you read up on it first. Try www.toyotanation.com for posts on actual experience. One suggestion that always comes up is to install some kind of overboost protection in addition to the waste gate. Overboost does happen and can blow the engine if not managed.