first of all, i wouldnt buy boss 302 parts for a 289.
A mod motor engine will require you to either cut back the shock towers a few inches or remove them completely to do a mustang II front Suspension swap. Those are about your only options for a mod motor or a big block.
You have to ask yourself what you want to do with your car...show, cruiser, racer, etc etc. Then you can go from there. You can have a 250hp high revving 289, a 400 hp daily driver 302, or a stroked 351w that is a torque monster.
12mpg isnt that BAD in a carbed classic mustang. An EFI conversion is quite easy and can be done from junkyard parts, but any future modifications get expensive....ie - computer upgrades, injectors, TB, aftermarket intake costs $400 easy.
Good luck with whatever you decide.