Important question regarding 1997 Ford mustang 8.8 rear

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The differential and housing will fit, but the pre-94 axles had drum brakes - you'll have to convert it to disc brakes. You don't say if your 97 is a V6 or a GT - if it's a V6 with the 7.5 rear end, you'll need to fab up the hard brake lines and mounts.
 
Totally not worth the hassle. It's going to cost you much more money to make that older rearend work than to get a new one. The old 8.8 (93' and older), is 4 lug instead of 5, it's narrower, and it has drum brakes. In order to put it in, you would have to have to get new wheels that had 4 lugs and a larger backspacing for the rear, and accept that you are going to have different wheels, or convert it to 5 lug axles which is going to cost about $500. If you keep the drum brakes, you are going to have to change your master cylinder out, and remove your ABS.

Kurt