Holly:
Restoring is a big project; I know, I've done it .
Right now, I would suggest investing in sub-frame connectors and new shocks and struts. KYB makes a nice replacement set of all six pieces needed for a very reasonable price; under $200. at Mustangs Unlimited.
http://www.mustangsunlimited.com/general.htm
For the engine and transmisssion, I would suggest you consider buying a Ford 'crate' engine. These come with most everything you need except water pumps (sometimes) and the fuel injection and ignition system, which should be replaced, anyway.
The engine runs around $3,000., which is expensive but you save a lot of time and labor going this route. Having your current engine rebuilt is cheaper but takes a lot longer and frankly, unless you know a trusted mechanic who will do the job for you, I can't recommend it.
The AOD can be rebuilt or just exchanged for a 'new' rebuilt but you should also invest in a shift kit and a new converter. Not cheap, either.
As you can see, restoration is an expensive process, especially if you're not a 'do-it-yourself' person and have to pay for all the labor involved, which is substantial.
Interior parts and external trim are all still available. Check the Mustangs Unlimited link (above) or the many ads in any popular Mustang-specific magazine for ideas about availability and prices.
Interiors can be refurbished for about $700. or so, depending on how much needs to be done; i.e. a new carpet is about $100., plus installation.
One thing to remember, especially when looking at
mechanical restoration - is that
everything on the car has 200,000 miles on it, not just the engine, which is why you can't just replace the engine and transmission and forget the converter, differential, suspension, etc and this is where it gets expensive.
Still, the '87 Mustang is a near-classic already and a great car, as I've noted. For well under $10,000 - about 40% of the cost of a brand-new car, you could have a powerful, classic Mustang that would only appreciate in value, instead of losing value with every mile, every month, as a new or late-model car does.
Restored properly, keeping close to original and having the work done correctly, you could probably enjoy the Mustang for a few years and almost break even when you sold it...or just hang on to it and watch it appreciate.
Things to remember when you look at the sometimes daunting task and substantial cost of restoring your '87 Mustang. I would start slow, replacing the obvious things (and checking compression and prehaps replacing the timing chain as PKRWUD sensibly suggested) but you'll have to decide if you want to replace/rebuild the 5.0 engine because it's clearly not wise to invest money on isolated parts for a 200,000-mile engine if it's going to be replaced soon, anyway.
Get the sub-frame connectors, struts, shocks and possibly new springs to take care of the 'ride', but also have the entire front-end (steering suspension) checked out, too.
Over 15 years, the rubber bushings wear and deteriorate, making the steering 'loose' and possibly dangerous. Brakes are another item to check carefully, looking for warped rotors and cracked rear drums as well as worn pads and shoes. How's your exhaust?
It's a long list but start with the safety items and go from there.