I think he wants to put in an american V8 beacuse it's cheaper, and then there is the wow factor. Why take the parts off a 911 when you can just buy a 911? When you add it all up you will spend the same amount.
Your right though, the 912 with a V8 wouldn't handle very well, even with something like a Rover V8 (that's 60's buick motor over here). This guy has a website about his 912 V8, but there are no pics of info in it yet.
http://www.geocities.com/thornking/porsche/index.html
I can't think of a good donar engine. Subaru flat-4? They can put out 300hp with a turbo and intercooler. Maybe the new Renesis rotory from the RX8? It could put out over 300hp with a turbo and only weighs 150 pounds.
What's a good transaxle? I don't know how much power the 5-speed (if you have the upgrade over the 4-speed) can handle.
In the end I think a stripped down 912, with it's original motor warmed over would make a great Auto X car.