What to do & what not to do?!

Reliability should be your first priority.

Cars that have been sitting a long time often times have dirty/rusty fuel systems.

Cool engines are far happier than hot ones so get the cooling system in order.

Do what you can with the your budget.  Time is free and a lot of things just take time.  Cleaning and re-greasing parts can give crappy parts new life.

Since you have the mechanical bits and a car that's common, maybe you should pick up one of these books,

find one of those cars for cheap, drink beer and ponder, and transplant said mechanical bits to failure car

So most people don't try to modify for speed or handling. They just do reliability?

Oh HELL no! 

The thing is a lot of teams spend more time and money modifying for speed and or handling and not enough on reliability.

Jay has even commented to me how many cars they see with all sorts of go fast stuff and they race a crappy old water pump.

A new water pump and good cooling system are more likely to earn you more laps than a set of headers or sway bars.

I even thought they could throw in the cooling system as a budget freebie.  It is not safety but it would be interesting to see how many teams took advantage of that.

Years ago to me, a bad radiator was a leaky one.  Now if see more blocked radiators than leaky ones.  Junk yard radiators are a crap shoot.  Sometime you'll get a good one other times you don't. 

We just realized one of our old spares had blockage.  In our case a new radiator is an easy $200.  I can get an aluminum one off eBay for under $200 but it's still up there. 

I am starring at a blown head gasket as I write this.  We lost it due to detonation but a better cooling system might have helped prevent that.

Reliability stuff aside, we have done about any free labor type mod we could come up with.  We ported the intake and head with a die grinder.  We mixed and matched various stock parts to put together a more interesting engine.  I made adjustable lower control arms so we could adjust the camber.  We put the car and engine on a diet.

One advantage to our old Z is they didn't have many options or engine driven accessories.  We ditched the A/C and smog pump and we're left with one $7 fan belt that runs the alternator.  It's pretty clean and simple under the hood.

Lots of parts can get a new lease on life with cleaning and re-greasing.  You don't have to have a parts washer either.  Get a gallon bucket or big drain pan, pour in a gallon or so of diesel and get some cleaning brushes.  Most serviceable wheel bearings can be knocked out, cleaned, re-packed and reinstalled.  You may be able to save the seals too.  Bearing are now safety so you can just replace them if you want.

I watch Craigslist like a crack heads take hits off their pipe.  Seriously, I have an addiction to Craigslist.

I keep an eye on eBay but it doesn't have as much cool stuff as it used to.  I did get poly bushings for $50 though.

I spent a lot of time looking up info and mods for our car on various forums.

I am still working on various ideas, like a 5 lug conversion and a ghetto LSD.  I am trying to find ways to use parts from other cars to do new and interesting things with them.

So yes, we have modified the car for speed and handling but we have also replaced the water pump, belt and hoses.  Re-greased everything we could.  Used a thread chaser on about every nut, bolt and fitting we can on the car.

Our car just recently saw one of it's biggest improvements in power it's had in a long time.  We got the motor back in and running right.  Sway bars, headers, improved fuel delivery do little to get you around the track if your motor is blown.

WOW.....the engine ran after YEARS of water sitting in it.....I'm impressed....I don't think a piston engine could survive that!!

Rotary engines don't have head gaskets, so I got lucky on that. I was worried about the apex seals rusting to the housings. The two cycle oil and a large breaker bar helped break the engine loss. Now I just hope they last.

Troy, Thanks for the info, I think i got a new view on what needs to be done. I all ready have the water pump off and have started the tune up part of the build. I also am a craigs list junky, I just wish Michigan had more Rx7 owners to scavenge parts from.