Hey Dan Welcome.
I will try and answer you questions. Be sure to use the search feature on this site. It really helps. There is a ton of info.
First off, see what is wrong with the engine you have before pulling it. Does it turn over? If so, why won't it start? And get yourself a Chilton manual for it. #(8424) 28700.
Some common problems with the G10 Metro's are:
Exhaust valves like to burn. Make sure your EGR system is not clogged and is working properly.
Lower ball joint/control arm. The ball joints like to wear out. It can only be replaced as a whole lower control arm assembly. These can be found for a reasonable price on e-bay. The ball joints are non-greasable.
Outside/inside door handles like to break.
Window regulators can wear out.
Modifications that work:
Engine: Install Suprf1y's
http://www.teamswift.net/3tech advanced cam gear. I have a +10 on mine and it makes a huge difference in performance with out hurting MPG. You can also step up to his re-ground cams and ported cylinder head with stainless exhaust valves if you want. Also be sure to have a good quality air filter or even a K&N filter. If you are after MPG, Superf1y is coming out with a cam and head package for this.
Exhaust: 2" mandrel bent with a good high flow muffler. Again this helps with peformance big time. You may gain a little MPG too.
Chassis: You can use the bigger sway bars from a Suzuki Swift GT. You will have to weld in the body brackets to mount the rear bar.
http://www.turbinetech.ca has a front lower body brace that connects the lower control arms together. Liam Burr (murr) has a brace also. I have one and I don't know how I drove with out it.
Wheels: You will have to upgrade the brakes on your car because the 12" wheel brakes are small non-vented rotors on the front and have tiny 10mm studs. Find a Metro convertible parts car and use the front rotors and calipers along with the rear drums and you can use the 13" wheels from the vert or aftermarket. The vert has 12mm studs and vented rotors.
Seats: Find some seats from the Swift GT. They are awesome. Also get the steering wheel from the GT. You will have to modify it to work with the turn signal cam of the Metro but it is an easy mod.
MPG: So far the only thing I have done to increase my MPG is making a home made water/alcohol injection. Search for G10 water injection here on the forum for full details.
I hope I didn't scare you off. These cars are very durable and fun to drive. If you take care of them they will last forever. I have the +10 cam gear, 2" exhaust, water injection, and advanced ignition timing to 8 deg. BTDC and I just pulled down 49 MPG this past week on 87 octane. And I drive it hard.
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M3----"M" body "3" cylinders.
Now Turbo'd
"M3 like the BMW?"
"No, like the Gillette razor."