To start with your on the right track with your pick of cars since the early fox body's are the best drag car out there. Don't do the 4wd thing because it will add way to much weight, the traction you will gain won't ever begin to make up for the added weight to the mass of the car and you are also adding lots of rotating mass. If it is a pure drag car put a full locker in it and if it is a street and strip car put a posi in it. Put some fat slicks under it and make sure you put subframe connectors and a drive shaft lope in it. One of the fun things about these cars is how nice they do wheelies why would you want to ruin that? They launch nice and straight and traction isn't an issue if you set it up proper. These cars are super light, about 2,500ibs stock! I was running my 81 with a 300HP 302 through a C5 shift with a shift kit and had 2:73 gearing and 235/60 R14's on it. I was running 15.6@90mph and I'm also a few thousand feet above sea level. I just had an open diff in it, the stock 7.5 diff and it normally hooked up on the track as long as I let the tires down to 18psi. (once it didn't and I smoked the tires past half track!) I ran out of money or else I would have put 3:55 gearing and a posi in it with better heads and I would have ran in the high 12's then. To late now I ended up selling it and it was totaled shortly after. Make sure you go with the C4 auto also. I bought all my parts from www.summitracing.com
and was very happy with their pricing, service and shipping times and would highly recommend them to you. I also wouldn't do the rotary engine idea, they are pretty decent on the track but they are a pain in the butt to get parts for and you will be way farther ahead and cheaper to drop a 351 in there or a 347 stroker engine, at the very least put a 302 in it, the low end torque will be way more fun and it will sound way cooler too!