i had this problem with my 1st gen

i managed to get about 120-130hp to the wheels

2.3 hydraulic roller head (found on most 2.3l mustangs)
get it Ported and polished and decked (high compression = more power)
bigger valves
Cam and springs (racerwalsh, crane, lunati) its your choice
350 CFM carb
header (most 3rd gens came with factory headers, easy JY find )

a little more work and you could get 150 to the wheels
go old school and find a dual carb intake (i've seen them, they're just a bitch to find)
MSD ignition

i know guys at my local dirt track with high comp 2.3 motors putting down about 350 hp running alcohol
i'd like to do that to another 1st gen just because its so off the wall

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1996 XLT 2.3T "White Lightning" 5/7 dropped, Turbo street toy
2006 FX4 Off Road, DD, work in progress
1985 XLT 2.8L 4x4 "The Black Pearl" (retired but still around)
1987 XL 2.3L 2wd R.I.P.