Yeah, handling is more than enough for some people... But why is power granted to "hot hatch" ricers, but not sports car drivers?
I'd venture a guess that it has a lot to do with the "dyno-queen" mentality. A lot of hot-hatch buyers like to say "my car has a billion more HP than yours"* and not necessarily appreciate low weight, low cg, brakes, steering, handling etc. the way a sports car driver will.
The decision might have been made to keep the car relatively forgiving. 200hp in a 2500lb rwd car is enough to get tail-happy, if it was the 305hp of the current STI it would be quite a handful. My impression is that 350Zs were being wrapped around trees left and right, it was around the 300hp mark and 700-1100lbs heavier.
Another reason to not have a turbo engine is weight. The turbo itself adds a little weight, and the supporting features add weight, then that weight compounds through other systems. Good example: MKII MR2s. The NA version weighs 3-400lbs less than the turbo version despite having a larger displacement engine. The turbo systems will also add weight over (or ahead of) the front axle, which would add understeer, which makes sports car drivers sad.
*only exdeath can say this