I've been told that even N/A rotary motors are capable of big horsepower. How is that possible being that the displacement is so small and they not much horsepower from the factory?

 

Little known fact: the rotors/ housings are actually flux capacitors v2.0

 

NA's are only capable of big power when you port them. It also depends on your definition of "Big Power."

Without opening the engine and rebuilding it, the are very little mods you can do to add power. Cone filter with a cold air box and full exhaust are about it (You can also add lightened flywheel for a little more power.) If you have an s4 then you can swap on an s5 intake for a good 10-15 hp at the wheels.
After that its porting. With a good streetport and rebuild you can probably put down 160 or so to the wheels, maybe a bit more. If you get a standalone you can start getting into the 180-190 range. The highest I have ever seen on an NA rotary with a streetport is around 200 WHP. To get more than that you are getting into radical porting like bridge and peripheral, and it is no longer very streetable at all. Even then, 250 for a bridge and 300 for a peripheral is about all you can hope for. You can get more, but its totally underivable on the street.

So basically, the moral of the story is, if you want over about 180whp for a street car, then you better start thinking about forced induction.