125's can work just fine in the woods! I ride my '01 YZ125, one of the pipiest 125's, in the woods all the time. The best thing you can do is change the gearing. I went from 49t to 53t on the rear sproket, it made the bike MUCH better at low speeds. A good chain is real important too, might as well take care of your new sprockets. Also, going down smaller than a 13 size sprocket off the countershaft probably isn't a good idea, too much stress. Do a search, this ones been bickered about a lot. I prefer to add teeth to the back.
Secondly, get your jetting perfect. If your going to be putt putting around in the woods, you don't want a bike thats going to load up and/or foul plugs on you. Also, you want it to pull hard quick and clean as soon as you need it, so good jetting is a must. Other than that, well, there is porting, and pipes, and all that, but I stay stock, and let the 125 size motor make power the way it likes, screaming. If I want low end torque, I should ride a different bike. I still need clutch work in some of the really tough sections, but not too bad. And the handling is beautiful. Well setup suspension is another important thing.
Just as a side note, the '03 KTM125 makes an awesome woods bike, great middle power. Juice clutch is real nice too.