Those are both very hard questions to answer without some info about what you are going to be doing to the car. Notchs are more rare and generally a little better for racing because of their lighter weight...but some people just prefer the look of a hatch...I myself prefer the look of a notch.
As for the motor that comes with it...it's not HARD to swap from a 4 cyl to a 5.0, but you better have a decent parts car. If you don't have a parts car kickin around, you are probably better off starting with an original 5.0. If you have a parts car, you can save a good bit of money by buying a 4 cyl car...especially if you want a notch, as people are often asking a pretty high premium for a nice 5.0 notch.
Hatch or Notch is totally personal preferrence.
As far as question 2 are you planning installing a tranny and rear suitable for your needs?
Its my opinion, but I would buy a LX 5.0 in decent shape somewhere and start at that point.
To answer your quesiton bloodreign...this will be a strip/steet car...in that order.
OK...good answers...lemme be a little bit more clear on question 2....
I will NOT use the motor or tranny that comes with the car...I thinking thing like motor and tranny mounts or since I am basically going to gut this car...does it really matter?
One last question...Im new to research of fox bodies of this era....rear end are they 8.8s?
Thanks again...valuable information from you guys.
get a notch if its for racing. Either starting with a 4 banger or a 5.0L based Fox would be fine. The 5.0L from 86 up had the 8.8 rear end in them. Build yourself a 460 if it is a drag car.