Aftermarket Sub-Frame - I think this one piece alone will help to blow your budget out the water. I would try to stick with the stock subframe and talk to someone about upgrades to it - ie: DSE, SC&C. ATS makes spindles for the 2nd gens too. You are also going to want sub-frame connectors.
I think I'm P.C. here cuz these are all site sponsors - if not edit out.
http://detroitspeed.com/
http://www.scandc.com/faqs.htm
http://www.t56kit.com/
I've seen some cars with leaf spring rears perform very well, depending on budget you could probably get a set of leaf springs to work well for you.
Oh - get some good Shocks!
Just my opinion, but the weight savings from an LS series engine or just a well built small block w/ aluminum heads would help more than the $7K you could easily spend on an aftermarket sub-frame. Try to pick up some fiberglass body panels - ie: hood, decklid. ---Weight Savings
I know you got the car cheap at $400, but it won't take long to spend $12K. Even if you paint it yourself you could have well over $1,000 in materials.
Just don't shoot your wad too early!!!!!!!!!!
I look forward to following this thread/build. Good luck and Godspeed!