The quickest way to gain 40 hp

My 3650 has given no trouble for me at ~390rwHP. But I also have 245-series tires and am somewhat traction limited giving the trans and rear a break. Lots of people are making way more power and torque on this transmission without trouble.

If you don't drive the thing like it's a race car you won't have to pay as if it was a race car. If 5000RPM clutch drops with slicks and full-throttle power-shifts are in the car's future, upgrade the driveline accordingly. If it's a daily driver and will be driven as such, the stock driveline parts should be fine.

Why did you buy a car with a "stupid number" for power and a transmission that "blows"?
Look dude, speak what you know, you won't win any brownie points here for posing.
TR-3650 certainly does not 'blow'. It does exactly what it was designed to do and it does it well. The 260 HP that the 2V motor produces gives you about 215 at the rear tires. If you wanted a smarter number, you should have dug a little deeper into your wallet and opted for the Mach 1 or Cobra. My guess is that your wallet wouldn't allow that, so now you're trying to play catch-up (literally and figuratively) little by little. If you want the cheapest route, go with nitrous. If you want that power to be available all the time, as stated above, you need some large dollar upgrades. Kinda makes you wish you bought the better car now doesn't it? The Mach 1 market is great right now and you can get 300 RWHP easily. I hit just over 300 (303 to be exact) with underdrive pullies, throttle body, midpipe and catback. That's it. Ahhh the joy of the 4V motor!!!

I've said it before, and I'll say it again. Horsepower is just number. What really counts is how well the car and driver can use it. I regularly beat PI mustangs in my 97, despite being down 45hp. It's because I maintain it carefully and I can wring the most out of it. Learn to do the same in your 02 and you will have more fun. My dad and I went to the track once, he has a stock 06 GT, and I ran my 97. Despite the 85hp difference, he was only running .2s better than me. (I made some passes in the 06 and couldn't make it run faster too)

My 88 only made 306rwhp on the dyno, but it regularly beats cars with 400+hp. Yes, horsepower is just a number and it's not that meaningful.

Why not enjoy the car for what it is, and the power it has? There will always be someone with more power and deeper pockets than you. Maybe you can bring your GT to 300hp, but just remember, it is a WHOLE LOT easier for that LS1 owner to make an extra 40hp compared to you. I think you bought the wrong car. Through history, the mustang rarely has the horsepower advantage on the Camaro, but is generally the better looking car and with a little nicer fit and finish.

Put gears in it first thing. That was the first thing I did in my '99 and it felt COMPLETELY different. My car was stock when I bought it 6 months ago and with the mods done in my Signature it is plenty as a daily driver.

The stock 3650 is not weak at all. It stood up to my 700rwhp for almost a year and 15,000miles. I sold the tranny to a guy that now has it in his 400rwhp 2v.

If your looking for the cheapest and fastest way to make power then supercharge it. Its easier to make power then free up power with bolt ons. Nitrous is cheap at first but $50 bottle refills adds up fast.