wow a resurrected thread that I started!
welcome to the club, TexasVet.
If you smell burning oil, then there must be a leak somewhere. If it isn't appearing on the ground, check the tranny and engine bay. Might be the HG, but there are usually other symptoms (coolant, heat issues, etc.) as well. HG should be covered under powertrain, if you ask me. Unless they claim it's a wear item, which I would consider bs.
snorkusectomy. Sucks in cooler air, but don't expect to shave seconds off your 0-60.
K&N air filter. Better response, but again, you're not going to start dominating the drag strip.
Lightweight pulley. but will probably void your warranty.
Check the Legacy forums as well - the Outback and Legacy are 90% similar under the skin, so lots of useful info there.
And again, welcome!