How can I make my drive smoother?

I'd have a look at the front suspension bushings and see if the rubber is good. Go for a polygraphite kit from PST or Energy Suspension.

http://www.p-s-t.com/home.html

I know my suspension is shot - need the full kit + springs - and I'm just dieing to spend some bucks upgrading it. I wince everytime a little bump comes along. I can feel the fillings in my teeth when that happens. Just waiting for cash flow to build up, spending time doing the labor intensive/economical stuff first.

Also, one last thought, I think if you were to increase your tire size over the factory rims you would probably have a better ride too, since I'm pretty sure that wider/bigger means the potholes don't catch as much tire.

Errr....well.... Polygraphs are an excellent bushing, no doubt about that, although, they will definately ride stiffer that oem-like rubber bushings. So I'd say, No to the polygraphites and stick to stock rubber mounts for a softer, smoother ride.
As a nature to any Mustang, there wasn't too many that actually rode smooth. Smooth to one of us may be rough to another. Try to define what you trying to pass as smooth. Likewise... some want to be able to hit a speedbump at 45 and not spill their coffee.. But You get the idea.

A good point to start is to find out what you have for shocks. They may be higher performane units (stiffer) and could easily cause this. Another easy tell-tale is tires. A low profile tire will absorb less shock (shorter sidewall) than a taller tire. If it has non-original tires, I'd look into that too. Just a couple easy ones to start off with.
Like I was saying before, these cars really never rode smooth, certianly not like any Crown Victoria or Taurus. The stiffer the ride, the better it handled (at least in old car technology!)