i would go with the 1.8. it is superior in drag applications due to the power made in the high revs and the fact you will always be in the powerband.
as far as having a bad transaxle, smaller flywheel and clutch, that is true, but the 1.8L motor can use the 2.0 transaxle, and will bolt right up. so pretty much all you are looking at is building your transaxle a little and building the 1.8 for a completely compatible drop-in.
with the right internals and boost application you should smoke anything on this forum.
since you have to order new pistons anyway, i would overbore the head and get lower compression pistons (ie 8.5:1 or 8.0:1) while youre at it. this should give you a little more power and let you boost more.