Some have gone for the VR6 route but that is a lot of weight up front; the 1.8T option seems to be the better one. Roly has built a great looking red Mk2 - do a search there is stuff in the forum.
TBH unless you do the work yourself if is a lot of money - TSR used to quote £4k for an engine swap into a Golf Mk1 so assume an
Ibiza would be a similar amount. Best way to do it is to buy a scrapped
Mk3 Ibiza, do all the work yoursel, then sell off the various bits and pieces you don't need from both cars and if you are lucky, you may even end up making money.