First I'm starting off by saying this is my fiance's log in. Ok first a 289 is a very good motor to build power out of. A 289 is a 302 block with the same bore and shorter stroke. The cylinder heads have very small combustion chambers which keeps compression up. The 2 barrel engines had 9:1 compression and the 4v had 9.5:1 compression factory. A 289 is plenty of engine to make a mustang classify as a muscle car. I have a 67 Cougar with a factory 4v 289 that I'm restoring and my fiance has a 65 mustang that has a factory 2v 289. We just finished building her motor. It is bored .40 over, stock heads, 484 lift Crane Cam, matching valve springs w/roller tipped rocker arms, aluminum intake and 750 holley 4v. With the factory C4 and 2:72 rear gear ratio it will smoke 10 inch wide BF Goodrich radials and chirp 2nd gear. If you put a 4 barrel intake and carb (600cfm) with headers and a lower gear( I recommend a 3:50 if it is a auto) in it it would really surprise you. The cars are very light and don't take much to get them moving. With those upgrades you would be about even with a Hi-Po. Search Youtube for Hi-po 289 there is a dark colored one on there launching. By the way my fiance's car runs on 93 octane now and averages 10 to 12 mpg around town haven't driven it much on highway yet. Good luck, hope this helps.
Muscle cars have big motors with a lot of horsepower. It seems like you don't know much about cars... so you should buy a Ford crate motor to replace your 289. 302 is the biggest motor that will fit in the engine bay. You can stroke a 302 to a 347 and make around 450 horsepower. Make sure to strengthen the chassis. Get subframe connectors. And you should put a Trac-Lok differential in it so power goes to both wheels. Traction bars will help also, it make eliminate wheel hop.