[Fox Body]

First of all, what year Mustang do you want to put it in? Makes a small difference on restoration.

1) Good idea to get it from a junkyard and rebuild. I got mine from a junkyard for $150, a friend and I pulled it. Got it from a Marshall's Dept (police) '87 Crown Vic. I feel getting it from a former police car is a good choice, b/c even though they maybe beat hard, they are serviced regularly, also have oil coolers and transmission coolers on them. A rebuild to the motor the way you want it shouldn't cost over $800 (+ you can port your heads or get better flowing ones for $1500. )

2) Get yourself a C4 (that's if you want one-- I dunno, you may want an AOD) from a junkyard or used (~$100-$200, depending on the shape that it's in) and rebuild with shift kit, stock torque converter and some extra clutches. Should be around $700-$800 for rebuild, which is considerably cheap compared to newer vehicle tranny rebuilds.

3) Edelbrock Performer RPM intake, Flowmaster American Thunder exhaust system (3 chamber mufflers), MAC shorty headers , 650 cfm Holley carb (all for ~$1100).

4) Make sure you got 8.8 inch rear end with at least some 3.08s. (The steepest would be 3.73s)

There's a lot more... I hope this helps a little just to get you thinking as to what exact setup you want. All mentioned above comes to about $3000. With a mechanic of decent price service, you can get MOST of what you want done for (parts plus service) $5000 or less. This does not include paint, aesthetics, roll cage install, and other major suspension upgrades. And it also depends (whether it'll be cheaper or more expensive) on what you already have or what you want, etc, etc.

With good traction and decent suspension, w/ a 100hp shot nitrous, you should be running at least very low 13s to high 12s.