I'd gotten the impression that simple lower priority of the project (by the RLM) forced the low-power low-priority powerplants on the design, not necessarily fundamental limits of the airframe. (and the 14Ms also had reliability issues on top of low power)
But, yes, the BMW 801 would be way overkill for the HS-129, if anything the BMW 132 or Bramo 323 would be the most practical alternatives. Both are similar sized and the 323 is a bit heavier, but the model supporting MW/50 allowed 1200 hp. The 132 is probably best though given the significantly better fuel consumption and better power/weight ratio outside of MW/50 (for the 132N and K models at least -comparing max/takeoff ratings).
Even going to the 132 could have a significant impact on range/endurance unless it had significantly better fuel consumption than the 14Ms. (higher weight and drag from the larger engines -maybe reduced somewhat if 801 style fan cooling could be implemented) Unless they could increase fuel capacity, but then that adds weight and if it's too much you're not really any better off. (and even if not excessive, wingloading and roll rate would suffer)
The diameter difference from the 14M to the 132/323 is huge, but weight not nearly as much (power/weight ratio is considerably higher for the latter 2), so that would probably be the biggest factor in physically adapting it to the frame. (had something in the power and size range of R1830 or Bristol Taurus been available, that would have been preferable -the taurus had maintenance/reliability issues, but the R-1830 would seem great)