Both will have a marginal effect on performance (eg K&N will give "UP TO 10%
more hp"), while making more (pleasant) induction noise and "rumble
underneath".  More audible engine noise will feel like more performance, and
there's nothing wrong with that.

K&N allows more air in, a less restrictive muffler allows exhaust out a bit
faster. So, the correct sequence of mods might be

a) replace the entire exhaust with a 1/2" bigger system with a free flow cat
and a header system.
b) add a K&N
c) update your suspension and brakes to be ready for more hp
d) replace the existing non-programmable ECU with a programmable system eg
Motec.
e) injectors, cams, turbo?

You won't see any major performance until d).