1988 2.3 with a noisy clutch

If it sounds like the gears are grinding (like when you miss a shift)then it may just need a clutch cable adjustment.

The clutch should start to engage about 2 1/2" off the floor. If the clutch engages at less than 2 1/2" then the cable is probably too loose. I don't know what year the mustang started coming with an automatic adjuster on the quadrant linkage. If it does have the adjuster, you need to pull up on the pedal when it is released to tighten the cable. If that doesn't work then the adjuster may have some stripped teeth on it. The stock quadrant and adjuster is made of plastic. If thats the case you can replace the quadrant with a metal one thats used on the 5.0. you will need a firewall adjuster or a new cable with the threaded end instead of the crimped ball end. Most aftermarket cables for the 5.0 will have the threaded end.

If the noise is the same as the one my car sometimes makes on a downshift, then the trans needs to be rebuilt. Could be bad synchros, blockers or bearings. The best description I have of the noise is a high pitched chattering that stops as soon as I push in the clutch.