One may wonder why anyone would want something besides the inexpensive and easily obtainable Type 1 engine in a Bug (or whatever else you drive). There are numerous reasons why a Type 4 should be considered for your project.
The Type 4 should be on top of your list if reliability and longevity are what you are looking for. Unlike the Type 1, a Type 4 in stock form uses a conventional spin-on oil filter in addition to the oil strainer at the oil pickup tube in the oil sump. The filter increases the life of the engine considerably as the bearing only receives thoroughly filtered oil.
The Type 4 also has a larger oil cooler, larger oil pump, dual relief case, "sand seal" (a seal at the end of the crankshaft where the fan/pulley mounts), larger flywheel/clutch with 5-bolt mounting, and increased oil capacity (3.5 liters versus 2.5 liters in the Type 1). The Type 4 also used an aluminum alloy in the case that made it stronger than the weaker magnesium alloy used in the Type 1 case. Everything about a Type 4 is just stronger.
A the top of a lot of VW enthusiasts' list is increased performance. A stock 2.0 liter can put out 100hp in stock form: that's over 40hp more than a stock 1600cc Type 1. Take that 100hp 2.0 longblock, add dual Webers/Dellortos, centrifugal advance distributor, and a header/quiet pack exhaust system, and you'll amaze everyone, including yourself. Imagine having over 100 hp of power built with with what is essentially a stock longblock?
This lure of power doesn't stop there. With Type 4 stroker cranks available up to 90mm and big-bore kits to 105mm, you could theoretically build a 3119cc (190.3 ci) engine for your VW! Luckily the Type 4 crankcase is constructed of an aluminum alloy, thus it is more tolerant of higher rpms and higher temperatures. The Type 4 cylinder heads also feature larger intake ports (all dual-port), larger valves, and a larger ratio rocker (1.3:1 versus the 1.1:1 for the 1600cc Type 1).
Another practical feature of the Type 4 engine is the fact that the cylinder heads and the cylinders feature more cooling fin area than the Type 1 engine. This means that the Type 4 engine can cool itself quicker. With a properly built Type 4, you can take advantage of this extra cooling by increasing the compression ratio, which will increase the power the engine produces.
I've always believed that form follows function. That means that looks are second; if something works better but isn't the most "fashionable", the part that works better wins. It's like the old saying, "chrome don't get you home". That's what makes the Type 4 so great. If you're looking for a conversation piece, a Type 4 will do it. When people see that you don't have a standard Type 1, they're going to inquire what kind of engine it is. This especially happens when a Type 4 is used with any of the upright cooling systems. The look is unmistakable!