Sounds like a great idea to me. The 1.6 is a straight swap for the 2 litre when the insurance gets a bit more reasonable which can be followed by either a straight swap with a Cossie engine, the Cossie turbo or swap the engine crossmember for one out the V6 model and fit any of the RWD Ford V6's in there from either a Capri, Saphire Cosworth or up to the late model Scorpio. All the same block on the outside to the best of my knowledge.
The car was originally designed for the Ford 302 or 351 V8 and either of these also fit quite easily with a choice of manual and auto gearboxes.
Brakes can be upgraded with a spacer kit in the caliper for vented discs, 4-pot Capri calipers if you can find them or a number of reasonably priced disc and caliper upgrade kits depending what size wheel you use.
Go for it dude