Psomniferum

I have a 1991 LX w/ the 2.3l Pinto engine. I wish to use this car for my daughter to train on as her 1st racer. I am new as a baby when it comes to 4-cylinder performance.
I would like to build a stout bottom-end and drive-train for her to be able to "grind 'em til she finds 'em" without worrying about anything falling apart on her. I was THINKING of using a crank from a 2.5l as a mini-stroker. Are the hypereutectic pistons that come with these engines able to withstand a shot of nitrous? Or should I just stay with the 2.3l crank and rods and order a set of replacement turbo-pistons? From what I've read, the ONLY difference between the rotating assembly on a NA and a turbo engine are the pistons.
Also, common sense would tell me that the roller-cam that's already in there is probably best for performance compared to any flat-tappet cam from a turbo. (Am I mistaken? Did the turbo-engines have roller-cams a few years before the NA cars had them?) I've also read the 2.5l head flows better than the stock head. Is it enough of an improvement for me to swap heads? I plan on doing the standard fare, mild port-match and polishing of the runners (keep in mind, I live in California and wish to remain smog-legal; the reason I'm going with laughing-gas instead of a turbo. The engine has to have been a factory-option in order for me to put it in the car. I highly doubt the inspector is going to pull the oil-pan and see the mini-stroker crank, lol.)
Also, should I look into finding a turbo-tranny to put up with a teenage driver? I don't figure a stock-tranny will live through the abuse and I've read that v8 trannys are geared too differently and will make the engine bog-down off the line. I've seen articles of people mating a t56 6-speed behind this little engine, but then I would have to gear it to the moon to get it in it's sweet-spot, wouldn't I?
I've already got the 8.8" rear-end from an Explorer that my bro shortened for his car before he changed his mind and went with a 9". He equipped it with 3.73 gears and a T-Lok. Are these gears low enough? Or should I go with 4.11s? Also, I was told that if I take plates and disk in the T-Lok and re-stack them plate, disk, plate, disk- instead of the plate, plate, disk, disk set-up from the factory- that it will hold a little longer before letting go. Was this idea legit, or did the guy spend too many days out in the sun with no shade?
Was also told they offer an industrial version of this engine- LRG 425- that uses the best blocks off the assembly-line, therefore MAY BE a better base for building an engine that's going to see abuse. Is it worth tracking one down?
After I bullet-proof the engine and chassis, I was going to give it a shot of laughing-gas. Was thinking of a 100-horse kit til she got the hang of things.
This car is going to be her daily-driver while she enters college but she wants a little racer of her own to take to the track with me, so it has to be livable as well. Am I WAY off base here? Or is my thinking on the right track? Any advice would be greatly appreciated by a nervous dad and a daughter that wants her 1st race car. Thank you for your time and consideration.
I already have the hubs to switch over to 5-lug and plan on putting v8 disc on all 4-corners.

Psomniferum

I've been doing the research and it would seem easier to sell the '91 and buy a '79-'86 since they had the turbo engine as an option. That would meet CA requirements to add a turbo to a NA car as long as it was the same model they put on from the factory. Lot of recommendations AGAINST nitrous. So after I rebuild the engine and use forged pistons; does the stock turbo head and cam have more potential than a ranger 2.5l head and roller cam? will the turbo manifold bolt up? If I stick with the turbo head, should I leave the cam alone, or will a '91-up roller cam be better?

TRBOPWR

I am unsure about CA requirements/rules/craziness, so forgive me ahead of time. I will try to provide some answers, but don't be afraid of follow up questions.

Your best bet would be to find an entire drivetrain from a TurboCoupe or XR4 and swap it into a Mustang shell. Whether that is the '91 (not allowed?) or a 4-eye car, it will be the simplest. With a turbo drivetrain you would eliminate those head/manifold headaches, as well as already have the correct transmission, larger injectors, and turbo computer to make the car run right.

The Ranger 2.5 swap is not a common one in the 2.3T world. Honestly I am not sure why, but there must be a reason. I would assume there are issues making it work correctly along with requiring new pistons that just aren't worth the extra 0.2L. That time and effort could be applied to porting the 2.3T head and getting good results.

The 8.8" should be plenty strong as it sits. Mine has taken several hundred launches on drag radials with no issues. I should also add that my stock 7.5" took a couple hundred before it finally gave up. The cars just don't make enough torque down low to do much damage. The 3.73's should be fine as well, and they were good enough for the 85.5-86 SVO straight from Ford. I had 4.11's for a while, but then first gear is essentially useless. I later swapped to 3.55's and liked them better. They also proved to make the car quicker at the drag strip.

Swapping a Ranger roller into a turbo motor is common. I would say if you have one or can get one cheap you might as well. It has slightly better top end power along with a nicer idle.

The transmissions in my SVO's were both World Class T5's, and I have a couple spares from TurboCoupes. The issue with a V8 T5 is the input shaft and pilot bearing. Depending on where you source your transmission there could be issues.
http://www.allfordmustangs.com/Detailed/349.shtml

Turbo+Nitrous is a scary combination. Very few of the 2.3T guys have nitrous on top of the turbo, tuning gets extremely tricky and requires a standalone option like MegaSquirt or something similar. Even then, most of them are only using it to help spool a monster turbo down low until it can get going and start making power.