the Mk2 big bumper covers from around 1991-92 can be morphed onto a Mk1. I've seen it done. Might be worth it to do a little google searching on that and project sipster that has been mentioned. Take what they did, make a aero bed, low RR tires, moon hub caps and I bet you could beat them.
Oil, use Shell rotella T6 synthetic 5W40. If you go too thin, bad things happen to VW motors. You might be able to use Redline MTL in the trans to cut down on lube drag there.
IDI motors do not respond well to propane injection from what I hear.
Injectors: A good set of balanced injectors with proper new heat shields is probably the best way to go.If you are already talking with or going to go with Giles, he can sort that all out. I've had 3 injection pumps done by Giles. I wonder if he still posts the video he did with my 1.6 TD pump? I was the first in E TN with a Giles pump. After the local shops drove my cars, they now send their pumps they want done right to him. It costs some $$$$ but they are spot on, install it and forget it. He is best one to discuss and set up your needs for fuel economy with the injection system.
You do know about the VW GTD forum?
VWDiesel.net The IDI, TDI, and mTDI source.
Look at the techtonics tuning downpipe and exhaust. Uses the stock 2 hole cast iron manifold with a decent sized piping. Not too big to ruin exhaust velocity hurting torque, but a bit better flow to not choke the motor. most 4 into 1 or try Y headers for VW are aimed at top end HP. you want torque and efficiency.
What exact transmission code do you have? You have tons of gear ratios to choose from. How high would you like to gear it? Trans from 1975 to 1998 and beyond will bolt into the Mk1. The later you go, the harder to get the linkage and clutch sorted out but it can be done.
There is almost too much info to dump onto you all in one post. I wish you luck in the project.
I have a TDi into a 1981 Scirocco S project that is floundering from too many other projects.