Your friend is overconfident. It's going to be a drivers race. The 350 might make a little more torque than the 5.0L HO, but the vehicle weight and that slush box automatic is going to kill him. These cars were always a drivers race on the street throughout the '80's, with the majority of the wins going to the Mustang. If I were you and you plan on running it at the track, your first mods should be gears and tires. A set of 3.73's and a good set of drag radials will knock half a second off your ET's.....easy!
As far as parts.....if you're trying to do it on a budget, hit the local junk yard and pick up the heads and intake off of a 5.0L Explorer. They came stock with GT40 (or GT40P, depending on the year) iron heads and a cast aluminum version of the more expensive and rare GT40 intake. Spend some money on better valve springs and a good 3-angle valve job at a local speed shop, swap out your E303 cam, pick yourself up a 70mm MAF meter from one of the many Ford cars that got them in the '90's and have at it. That's a recipe for an easy low-13-second car all day long.
Personally, I wouldn't bother with intake alone. If you can't afford to do it all at once, keep stock piling parts and cash until you can. Installing these mods one at a time isn't nearly as satisfying as doing them all at once.
If you ever plan on making more N/A power than that....don't bother with the GT40 hardware. Things are going to start costing you money from here....
