
As i am very new to this, i would appreciate help in knowing what engine to use of approximately 1300cc, and what donor car to use.
Depends how much money you've got, amongst other things
1300 Crossflow - cheap if you can find one, may need a rebuild unless you can find a whole setup from someone who's going bike engined.
1.4 litre K-series - fairly modern 16V alloy, reasonable power, can use standard ECU
1.25 litre Zetec SE (Fiesta) - about the right size, don't know if it's any good but the 1.6 is supposed to be OK
1300 Hayabusa
Welcome and good luck!
Choice of car depends largely on your choice of kit but it basically comes down to either MK2 Escort or Sierra.
Kawasaki ZX12R - 1200cc
Oh yeah, and a few bits from a Sierra. 
various mazda's
1.3 or 1.4 Escort/Fiesta CVH --- very cheap mates to a Sierra box easy upgrade path to 1.6 CVH or Zetec 1.8 or 2 litre.
BMC A series from a Marina --- ain't fast but easy install and has classic connections with the Lotus 7
[Edited on 5/12/05 by britishtrident]
i agree, would say cvh on a type nine gearbox onto pinto or zetec later
can't beat k series though light and responds to tuning downside is fitting gearbox to it