From the top:
There are only a couple things wrong with a B21FT based build: one is that you can only (properly) fit the "small" heads on it (160/398/530), and the other is displacement. The B21 blocks can take a substantial amount of overboring - even up to 96mm and beyond, so long as you don't plan on turbocharging it. A first overbore B21 will be stronger than any B23 or B230 block, not that the block is the strength issue or anything. 405/531/16v heads don't fit on the B21 block very well, and you're compromizing a little flow if you try it.
B21/B23 crank is superior to the B230 crank in a few ways: first of all, they're forged. Second of all, they give you options as far as bearings, rod/stroke ratio, etc. Thirdly, the rods are crank-steered so you don't need to have the pistons SOOOO tight like you do with the B230. The prime advantage of the B230 crank is the smaller bearings. If you want an example of what can be done with a B20/21/23 style crankshaft, talk to Ian Rankin on this board: He's got a 2.6 litre engine built up in his 142 made out of Ford pistons and DSM rods, if I'm not mistaken. Not great for turbocharging (pistons), but the rods are plenty strong and there's lots of possibility there. Custom (or just different) pistons WOULD be required. Besides, I doubt you can get the B230 crank in the B21 engine.
Compression ratio = streetability. Compression ratio = camshaft tolerance. Low compression ratio allows for lots of boost. When you choose your compression ratio, you should also be looking at things like: how much flow can you expect from your turbocharger; how much air do you think you can get into your engine; how fast are you willing to spin it; and how long are you willing to wait for boost? If you're going to stick with a Garrett T3 or an MHI TDO5-based turbo, I'd raise the compression ratio to between 8.5 and 9.0. Not much higher, as these engines aren't really knock-resistant. If you go higher than this, you'll basically have a naturally aspirated engine with a turbocharger attached to it. Dale has a B21FT with F pistons (9.3:1 CR) and on K-jet it was a ping monster at 6 psi. With Megasquirt it would probably be better.
The 530 is probably the toughest of the Volvo heads, as it has the most meat to it. It's also going to fit your block much better than the 531. You'll sacrifice a little intake flow with the 530, but it's not that important because the exhaust flow on both heads sucks. Going to 46/38 valves is easy-peasy - it's basically a valve job and a bit of time with a die grinder opening up the ports. Make sure your machine shop does the guides properly though - no less than 3.5 thousandths stem-to-guide clearance on the exhaust, and 2.5 thousandths on the intake.
The B230 intake isn't as good as a B21F/B23E, and you can get the injectors into the K-jet holes pretty easily. However, since you're using the 530 head, you don't HAVE K-jet holes and would have to get them machined out. I've got a tool for this, but don't have a jig for it at this time. So basically, B230 intake it is. Doesn't matter if it's from an F or an FT.
90+ exhaust manifold is good, better than the -89, but far from perfect. The proper tube header would be superior
For Megasquirt, it's pretty easy to install if you're careful. Tuning it is another matter. I've spent years with this system and it took me the first two to figure out HOW to tune, let alone WHAT the car was looking for. Don't let it scare you, though - it's a heck of a learning experience and it'll make you appreciate even the simplest car for how well the OEM engine management is sorted out.
The M46 isn't strong, but I've never broken one. The iron case version isn't any stronger than the alloy case: in fact, the alloy case has some beefier components. Not in the area that matters, that is - gear width. Both transmissions will tear out 3rd gear with equal abuse. The T5 is better but not great - it's a bit ugly shifting and 5th gear is terrible. If you go this way, I suggest rebuilding it and getting an .80 5th gear in there. You'll have to buy it new (not really available used) but it's not terribly expensive.
Cam will depend wholly on the compression ratio. If you keep the 7.5:1 CR, the wildest cam you'll want is the IPD Turbo or Enem V15 Turbo (basically identical). Either one will let you rev higher than 6500 RPM, but you've GOT to make sure the rest of your car can flow the amount of air required. Heck, I've even had 2 B23s happily rev to beyond 6000 on the stock T cam, with the right supporting mods. (For the record, my engine combination was B23E with stock B23FT pistons, 405 head with stock valves and lightly ported, B21F intake, 90+ exhaust, 60/63 turbo, 3" exhaust. Nothing exotic.) If you're going with a really big cam, you'll be expecting it to really rev, at which point you've got to be moving lots of air and have all your air system optimized, and you'll have to be sure the engine's capable of revving that high (valve springs), and your turbo will have to be really big (and as a result, laggy), plus the added monster cam will make the turbo even laggier & the low-RPM power worse. The big turbo will be choked off by the stock manifold, which means you'll need a tube header and that often hurts boost response as well. Choose carefully!
If you want to save a ton of money, buy a low-ish mile '90+ B230FT. '92+ has piston squirters, which are a negligable benefit. They've still got the cast crank and though they've got the strongest rods in a B230, they're still not as strong as those in a B23. Andy, the K block is the late '88 to late '89 "intermediate" block, with early rods and later crank. I believe the good one would be coded L, but I don't know for sure.
The Cometec head gaskets are good, but it's nice to have a "fuse". The stock head gasket will blow out if you do anything stupid, hopefully saving a bunch of parts from further destruction. The Cometec will hold on long after this, but possibly at the expense of a dropped valve or a melted piston. Head gaskets are dead easy to change in these cars - take advantage of that. Deck the block so the pistons are .010" to .020" out of the block, and with the .050" thick head gasket you'll have the appropriate piston-deck clearance.
Don't piss around with used injectors - buy new from DIYautotune, the same place you should be buying your Megasquirt. I just got a set of 52#/hr Delphi disc injectors for Houston's rally car at $60 each, brand new. By the time you find big injectors and get them cleaned, plus deal with the inevitable resistor pack because old "big" injectors are low resistance, you'll be better off with the new high resistance Delphis. If you MUST have something on the cheap, I've got a set of cleaned and balanced Ford CFI injectors (I think they're 37#/hr, 25% bigger than stock B230FT) you can have for $120.
For Megasquirt, don't cheap out. You can get by with the MS1 chip on a 2.2 board, but for a few bucks more you might as well spring for the MS2 on 3.57. You get a WHOLE BUNCH of improvements, and it'll do just about anything you want it to. They come pre-wired for EDIS, coil packs, standard ignition, whatever you decide. DIYAutotune has a starter harness that's all labeled and ready to go, and also seems a decent deal if you want help there. If you want to mount a trigger wheel to the crankshaft, talk to Dale.
For the flywheel - lightening it is an option, and I'll be looking at what's actually needed here soon, since I've got to do one for myself and one for Dale (and probably a few others, as soon as they hear about this). Using the stock 8.5" clutch is a no-go once you get to about 200 horsepower, so you'll have to look at upgrades from places like ClutchNet. I've never dealt with them (though I'm in posession of two of their clutches, haha) except to email them over and over again without a response. Andy had bad luck with his clutch, in that it wouldn't grab AT ALL until it wore away a good chunk of the pressure plate, at which point it'll now bark the tires in 2nd gear easily. The theory is that the clutch disk is too thick, and the over-center spring doesn't have enough grab until things wear away and the spring regains it's strength. (Diaphram springs are strongest when the PP is gripping the disk, and then go soft when you push on the pedal.)
That's probably enough to think about for a while...
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