I was told 88 M-VII have external balance whats that mean?
External balance means the rotating assembly is balanced externally. Rotating assembly is crankshaft, rods, pistons. External balance means that for this assembly to be balanced so that it does not vibrate, the external parts that bolt on to this assembly ie the harmonic balancer [or dampner ] is balanced with the rotating assembly. Most flywheels are balanced by themself so your flywheel is not balanced as part of the rotating assembly. If you used the harmonic balancer that came with the engine the only other part that needs to be balanced with the rotating assembly is the flywheel. In which case you either balance the flywheel to the engine or, purchase one for a mustang. Buy the one for the latest model mustang that had a 302 and you should be fine. As for the clutch and pressure plate, If the ones for a 302 are larger than the ones for a v-6 I'd buy them also but they may be the same diameter in which case you can use the ones that you have.