Had a '96 LT1 car- six speed, cold air intake, ported MAF, 160 t-stat, 4.10 gears, b&m ripper shifter, CAGS, exhaust dump, and other minor stuff- best of 13.9 on ET Streets, broke the rear end twice dumping that baby at 5 grand trying to eek more out of it. Probably ran that thing 50 times in the 1/4
Sister had a 99 SS LS1 car, A4 100% stock ran 13.7s on street tires listening to the radio and had never been to the dragstrip in her life.
The 8.8 rearend in the stangs is reason enough to go that route- Figure 1500-2 grand in the f-bodies for a 12bolt or 9" (not sure if they figured out abs yet or not(been out of the scene for a while) if you want to reliably run that much power.
if you go with a 99+ 4.6 or a 5.0 it shouldn't be too hard to keep up with an LS1. Also I know you know this but the 1987 to 1992 5.0 mustangs were all forged (love nitrous) 93 they went hyper like everyone else...