I had a 98 auto too. My drivetrain was phenominal. I had V8s that knew me not want to race me from a stop. I'll try to answer the questions as best I can for ya.
Shift kit -- A shift kit will open up the valves in the transmission. This will allow more transmission fluid to pass when shifting. This will firm up shifts and make them quicker. So instead of slipping the clutch plates, it will just grab and change gears. It's good for maybe .1 off of a 1/4mi time. Not really a great 1/4mi mod, but it does help the shifting and staying in the power band. Believe it or not, it actually helps the life of the tranny. Slipping clutch plates = heat. Heat kills transmissions. Price is usually about $100-150 for the kit and about another 100 for install. I think I paid $175 installed for mine at my old transmission guy's shop. Basically just goto an individually owned transmission shop. (ie. not a corporate or franchise store) and talk to the guys about getting a shift kit. They can hook you up.
Gears -- Get 4.10s. If you know you're gonna get a blower, then I would suggest just finding an 8.8 with 4.10s already installed and install the rear end yourself. You'll save a couple dollars, but you will have the security of an 8.8 to handle all the power you want. You'll also want a SpeedCal to recalibrate your speedometer. Or you can get a 23 tooth speedogear from Steeda.com and it will get you relativly close. Having a 98, you can get any 8.8 from 1984-2004 and it will bolt right up to your car. Rear ends from 99+ are going to be 1.5" wider over all, but it will fit. They will also be a little more expensive. Personally, I would search other mustang forums (mustangworld, corral, etc) for a fox body 8.8 with 4.10s. You should be able to find one for around $400-500 and then just put your axles, brakes, control arms on it and you're set. Gears will get you off the line quicker, but hurt you up top. The higher the number (lower the gear), the quicker acceleration you will have. Going from 2.73s to 4.10s with a t-lock will take about 0.4-0.5 off your ET.
Torque converter -- Amazing mod, but expensive. A torque converter does a lot of things. www.howstuffworks.com
is a great informative site and will teach you what a TC will do. Generally, an aftermarket TC (torque converter) will be lighter than stock. Less mass = quicker revs thru the tranny. They will also have a higher torque multiplier. So instead of a 1.xx to 1 torque rating from stock, you could end up with a 2-3.xx to 1 rating. So you will gain some tq lost from parasitic loss. They will also raise your stall speed. Having a 98, I would opt for a 2600-2800 stall converter. This will let you brake stall to around 2000 rpms with the converter locking up at around 2600-2800 rpms. A good TC can take 0.5-0.6+ sec off your ET alone. You will also get great 60' times because of the brake stalling and torque amplifacation. The downside to a TC is that it creates more heat in the transmission. As I have already said, head kills trannies. But to remedy this, you can buy a tranny cooler and hook it up. That will off-set the heat generated by the TC. a tranny cooler can be had for less than $50 from steeda.com. A TC will cost about $600-700 and about $200-300 to install. You have to remove the whole tranny to install this, and almost flush the transmission fluid. It's not a quick job.
On my old 98, I had a PI Stallion TC with a Transgo Shift kit, Haden tranny cooler, aluminum drive shaft, 8.8 with 4.10s and auburn posi unit. I also ran slicks occasionally and sprayed nitrous
off the line. I was cutting 1.6-1.7 60's at the track. I was beating cobras and trans ams off the line. (They would beat me after 60', but I beat them off the line) The AODE (4R70W) does respond well to aftermarket mods. I would not however suggest the aluminum driveshaft. IMO, it was a waste of money. I think with some good engine mods, and drivetrain mods you'll be fine.
Best of luck, Hope I answered everything you wanted to know. If you have any more questions, just post up here and I'll answer it. Oh, and welcome to ME :thumbs2: