The biggest improvement you'll make will be by adding an aftermarket pipe to the motor. If you aren't going to do any porting, the half-pipes are generally the best all-around improvement.
I would go with either the Coffman's Climax or Factory Pipe versions.
If you want to mill the head make sure you check the squish clearance in the dome first. On a stock dome, the clearance between the gasket surface into the edge of the dome is usually around .070". You can safely mill off .040" to .050" to bump the compression up to a good level still safe for pump gas.
Another relatively cheap thing you can do is have the pump reduction nozzle bored out. This will give it some more acceleration without sacrificing too much top speed. Some times, depending on what pitch impeller you are running on the 550, the top speed will stay the same or even go up a tiny bit. A stock 550 nozzle measures about 65mm in diameter. When I bored my 550 nozzle I took it out to about 67mm I think. How much you bore will depend a lot on how thick the casting is on your nozzle. You should be able to take the nozzle to a machine shop to have it bored for $40 or so.
This is a great link to the "other" forum that will have a lot more information on the old 550s. Look around in the Vintage Skis part of the forum also.
http://www.pwctoday.com/showthread.php?t=40122