1st gen Eagle Talon TSi (4G63 with AWD) or any 1st gen DSM
-A Manual Boost controller
-DRs
-Downpipe (non-catted)
-Full 3'' exhaust
-Better clutch
-CAI
-Front mount conversion
Good for low 12s, maybe high 11s. Add a cheap turbo upgrade and maybe new tubular manifold and you prolly have a consistant low 11 car.
3000GT/Stealths can be done the same way as the DSM with similar results, but its not as cheap. One thing I can say is that a turbo upgrade is easy; just buy two stock DSM turbos (16g turbos) from two reliable sellers on a DSM forum; because they like to get those sold when they upgrade. On a DSM you are basically forced to buy new.
I recommend carrying an extra transfer case to the track for the DSM, too.
I think that both these cars would be fun and practical in bad weather (AWD to have in rain and snow). I cant say the same for a Mustang or Camaro in the winter or rain.
I love the looks of a 3S (3000gt/Stealth) over the DSMs, but I love the package of a DSM. Light, AWD, and great mod potential. You dont need 400hp and sacrifice streetability to break into the 11s.
As for "gen" of Mustang I need your idea of what do you think a "gen" is with a Mustang. Its simple with a F-body. A Mustang was based on first a Falcon, then a Mustang II platform, then Fox body, then SN95 (modified Fox chassis), the S189 (currrent).
Most refer the SN95 as the 4th gen, but it has the most engine variants such as :
-5.0 (94-95 GT)
-5.0 GT-40 setup (94-95 Cobra)
-2V non-PI SOHC
-2V PI SOHC (99-04 GT)
-4V DOHC B-Head (96-98 Cobra)
-4V DOHC Tumble port (99-01 Cobra)
-4V DOHC 03 Head (Mach1)
-4V DOHC S/C Terminator
So with that said I would need to have a specific model to make a educated recommendation for the Mustang.
I would go to Fox body (3rd gen), but I still like the AWD practicality of the DSM and the fact it would be a good way to expand horizons.
As for the 4thgen F-body, LS1 or LT1? I would bother with a LT1 knowing the availablity of the LS1s and its HP yield.
My last thought, is that if you want reliablity, go Mustang or F-body. If you want a fast sleeper, good drivability in any condition, and that "WTF" response when you blow someones doors off; then go DSM. If you want all the above go 3S, but I doubt you can do it on below 8k including car and mods and if you do then I would question the reliability again.
Either one, best of luck and have fun. You cant make a wrong choice on a lil cheap project if you have the fun you intended to get on that budget.
For more info on DSMs:
www.dsmtalk.com