I remember hearing of Maddat's a13 speedway engine which was
boosted with 30+psi spun to 9500rpm and making over 400+hp.

Although 1296cc is over the limit for boost in U2ltr
you could destroke the L13 crank from 59.9mm to 54mm then
for 1169cc and 83mm bores with 2.496 rod/stroke ratio.
83mm de pistons, z22e worked conrods and for a gearbox
you have plenty of options for rwd or...

If you went midmount the cheapest option is a Pintara ka24e/de lsd
front wheel drive unit which have the vicous lsd on some models and
bolts up to the L series block.

I see those cars at pick a part often and always thought
it would make a great 90 dollar option for midmount L series
powered 1000.

L16 blocks are cheap and the L13 crank would be the only big part
of the equation for 54mm but once that is sorted the rest will
fall into place with even the option of a z18et head and some
serious manifold often available from ex-G. Fury old stock.

http://autospeed.com/cms/title_Packag ... anuts/A_1699/article.html