1. Any car can give you problems. If you aren't prepared mentally for this, you should not modify a thing. :)
2. It boils down to personal preference. I happen to prefer the motor in a 3rd gen, cause parts are cheaper...but I like the looks of the 4th.
3. Machine work will be the same for both blocks, bottom end is almost identical. Plus on a 3rd gen, the manifold needs to be thrown out. :)