[rick8750]

First and formost you should consider that there are a few things you should do that are completely free or very very cheap. Get those out of the way in your spare time.

1. block EGR port between upper and lower manifold.
Makes the air that comes in colder. The EGR port pumps hot
gases into your upper plenum to recycle the nasty fumes. You
can do the job with 2 freeze plugs from the autostore. $5
You'll need two 3/4 inch plugs but you should use a vise and
stretch them out to fit snugly in the EGR port. I used a
hacksaw to cut a cross patern in the flange of the plugs.
2. Bypass the EGR plate coolant lines. Without the EGR gases
passing through the plate you don't need the coolant lines.
That will ensure only cold air is entering the intake manifold.
3. Block the crankcase ventilation tube at the throttle body, cap
it with a vacum seal and ring clip. $2 now put a small filter over
the stem that comes directly out of the oil cap tube. It should
be facing the distributor.
4. Make a RAMAIR Shute that travels from your fog lamp hole to
your airbox. You'll have to remove the factory airbox silencer
and saw about 4 inches off the entry hole to fit a 4 or 5 inch
diameter a/c tubing section in it. You should use only the
aluminum flex pipe. All the stuff needed to dream up a good
RamAir system can be purchased at Home Depot for $15.

* The steps above will allow you to advance your timing safetly to
at least 14 deg TDC and in alot of cases even higher. COLD AIR
is the key to power with the mustang EEC-IV computer. The
Stock timing on a 88GT is 10 deg TDC. You should gain a solid
10 HP minimum by this tweak.

So... 3 mods? I would have to say:

1. Gear. 3:55 or 3:73
No horsepower gain but will greatly increase torque
2. Exhaust. 2 chamber flowmaster and headers for 15 HP
free up some backpressure and allows more head flow
3. Electric fan. pull a 94 - 95 mustang electric fan for 10 HP
this will free up some drag created by the massive clutch fan
shipped in the 87-88 GT's.

with this combo you're looking at a 35 horsepower gain and alot of low end torque (off the line power and pull). Here's a few other simple garage it yourself mods you should consider.
Ignition kit, crank pully, wireset, K&N filtercharger, performance driveshaft, 130AMP alternator, positive stop shifter mechanism or new shifter.
Have Fun!