Dude, looks like you and me are in the same boat , I did the 351 swap and now it's slower than ever because A: the stock 351 motor I have makes 240hp(maybe), and my old 5.0 had bolts on's and a Ecam that made about 250-260Rwhp.
B: the 351 is about 200lbs heavier than my stock 5.0
C: with hydraulic cam and bigger mass it doesn't run as fast and as hard, doesn't have the throttle response and spunk my 302 had.
You came into the motor for free, but I think it will be a waste of time like mine is, so just bag it and throw it in the garage under the workbench, or in the livingroom and make it into a coffee table, and save it for when you can afford.
Best bang for the buck, 302 swap, and you can find a million helpful articles and illustrations if you search on this site, and on any of the popular mustang magazines, like 5.0 mustangs/superfords, muscle mustang &fast fords, etc....
That swap is the easiest and the ultimate bang for the buck, a 302 has awesome potential for cheap. Check out the sites and search for articles.
your car only came with a c4 I believe, in 81 yeah, a c4 most likely. I think the c4 is just a square pan, and the c6 has an extra side to it and is not shaped the same, that's the easiest way to tell. the c6 has 17 bolts on the pan, and the c4 should have less.
Just remember, whether you put in the stock 351 or you go with a 302, it will still suck donkey nuts with an automatic and a stock 7.5 rear, the performance is terrible in stock form, my buddie's 90GT automatic with 3.08 posi ran a 16 at only like 80mph it sucked so bad. and he had some bolt on's and thought he had a bad ride. So while being a bit faster than the 255, it will still be pathetic and dissapointing without gears.
cheapest route:
get a 5.0 shortblock for about 1,000$
Trick flow twisted wedge heads, 1,000$
use the recommended cam from trick flow, get intake carb, and all necessary hardware for 5.0 swap, should make at least 300RWHP, and if you get that fully assembled 8.8 rear with 3.73 gears from year one, it should be a low 13 second car on street tires.
But if you go the route of putting in a stock 351 in a c4 with a 7.5 rear with no gears, it will problably do a 16 second run if it even makes it off the line without breaking the rear, Choice is yours man, good luck. I know because mine is slow as hell.
I'd problably be lucky to do a 15 with this piece of crap, and I got gears and traction! RRRR, why didn't I listen to the guys on this forum sooner!