There has always been an interest in self tuning in automotive engineering. It leads to better running, cleaner running, and minimal maintenance.
As a solid lifter engine is driven, the expanding and retracting of the engine will cause the clearances of the pushrod to become too loose or too tight. As a result, the recommended adjustment interval of the valves is 3,000 miles (4,800 km). As someone who drives a lot, this interval can be quite annoying. If the valves are not adjusted, the damage can run from poor mileage and poor throttle response to burnt and broken valves (especially the exhaust valve).
This is where the concept of self tuning comes in. Hydraulic lifters provide this self tuning. As the engine grows and retracts, the oil in the reservoir of the lifter fills and empties, providing just the right amount of valve clearance. This also means that we have done away with the valve adjustment interval. A side effect of this valve adjustment is no more loud sounds from the pushrods and rocker arms.
Volkswagen also saw how hydraulic lifters could make their Type 4 engines more efficient and have longer intervals between required servicing. So VW installed them on the 1978 and newer Transporters. This is in contrary to what some 914 web sites would like you to believe. Porsche-philes, check your Bentley manual for the later Busses, these engines did come with hydraulic lifters.
Always right on, quiet valvetrain, and no more valve adjustments, who could want anything else?
All of these great benefits of running hydraulic lifters seem wonderful, but there is always a downside. The downside is that, because of their design, hydraulic cams can not handle higher engine speeds and the lift at the cam has to be lower than a similar solid lifter camshaft. The general accepted maximum engine speed is usually 5,000 RPM with hydraulic lifters. So if you are looking for getting the most flow out of your heads with high lift and high RPMs, hydraulic lifters are not for you.
The other problem with hydraulic lifters come from some engine builders. It seems that the stock lifters make a lot of noise on start up and they've notice some resulting damage. This damage occurs to the crankcase's lifter bosses or to the valves in the cylinder heads. Until the engine is up to operating temperatures, it seems that the lifters are only partially pumped up, so that initial startup causes the valve lash to be excessive. I must reiterate that this is coming from a few builders, so further investigation is suggested.
As for my recommendations, if you are looking to build a mild performance street engine, or a show engine that you don't want to spend a lot of time tuning, hydraulic lifter conversion maybe the thing for you. Not having to adjust the valves every 3,000 miles would be welcome to anyone who drives a VW daily.
If you are going after the maximum horsepower out of your engine, hydraulic lifters are not for you. You need high engine speed and you need the valve lift to get the mixture into the combustion chamber, so go solid lifter.