Use YZ250/400D forks & triples if you can find them. Much better forks, with less-flexy 38mm legs, stiffer springs and more travel.
I wouldn't bother fitting cartridge emulators to the original 125 forks - it's not really polishing a turd, but does seem a lot like overcapitalising to me.
Stock rear shock can have an internal spacer shortened to increase travel & length. The spring needs to be preloaded with a spacer to match the extra length. Then limit the total travel to 9" with an external spacer. Simply replacing the oil and regassing will massively improve the shock.
Your bumpstop will be gone/rubbish by now - a new one will make a surprising improvement.
The major hardware of the rear end is pretty good - steel bodied 46mm ID and a decent sized shaft means that those bits can't really be improved upon with a new shock. However, it's possible & worthwhile to fit a modern valve piston to the shock. THere's a solid performance improvement to be had, providing they know what they're doing/everyone involved is willing to spend the time working it out.
Maybe you could upgrade to a remote resevoir with adjustable compression dampening if you are really keen - even so, this can be added to the original shock body if you go down that path.
I blindly jammed the valve piston & stock shim stack from a '93 CR125 into my YZ250G. It's too slow in the rebound, so it will have to come apart and be revalved. But even so, the overall performance of the shock is streets ahead of the standard shock...
