The 4cyl tranny is a lot weaker than the 5.0 units
actually 87-88 t/c units are w/c units and are the same as the 87-93 5.0 tranny except for the lower 1 st gear and closer overall ratio's this may help him on the dirt track if he decides to go with a 5.0
well,a 460 will fit in the fox cougar/thunderbirds,but the 87/88s would probably have to change the crossmember to an 86 and below due to the engine mount differences.you could use the mustang swap parts(i.e. oil pan,headers and engine mounts)once the crossmember is changed.
I am currently doing this swap 429/c-6 into 87 t/c
you must change the k member to either a stock mustang 5.0/2.3 or use a tubular version it will fit the t-bird fine as will all the other mustang swap stuff
you will also need the oil pan, headers,pulleys,accesories,upgraded radiator/cooling system/completely new exhaust, different drive shaft, switching to manual brakes, etc...
it is not a swap for someone who doesnt have mechanical experiance as fabrication is your best friend