My somewhat conservative suggestion is to build what basically is a stock late Euro 3.0. This has nothing to do with a goal of being able to outrace anything at a stop light. As for the track, you need some seat time there before you can decide what car/motor/transmission combination you want. Different tracks benefit from different gearing, but that won't make as much sense (especially when deciding what marginal returns - bang for the buck - might be between gearing A vs B). More importantly, unless you already have a street/track car, isn't it more valuable to have a 911 you can actually drive around and also gain track time in while you engage in the normal scheming to go faster?
Back to a Euro 3.0 (based on what you have): The non-stock parts would be a slightly hotter cam (optional, and slightly because of the CIS's limitations), stronger rod bolts (though these are not strictly necessary on such a motor as they would be for one with the 3.2 crank in it), and a good exhaust (the only must have, and a stock '74 would do as well). Assuming you can't get "good" used Mahle 9.8s, I'd buy a new set with cylinders. That will eat up a good part of your budget in itself, but it is good stuff.
I think you do not want to run J&Es with CIS, because the CIS pistons have funny looking tops designed to help the CIS. J&Es pretty much just have a dome, with valve pockets cut in as needed, and some of the dome shaved to adjust CR. Good stuff and good value for speed equipment (I have a set), but not for CIS (which also limits the cam).
I think you would run into the same CIS piston dome problems trying to bump up to 3.2. These had EFI, so I don't think they needed help from the piston dome. And to get to 3.2 with stock parts you need the larger 3.2 crank, along with rods to match (these do require the stronger rod bolts), which will also fit the pistons for these engines. No, 3.0 rods won't work - check out Anderson's or Dempsey's books on rod specs.
You could use 98mm aftermarket Ps and Cs to boost the displacement. But the CIS dome issue remains, and you are into cost creep again. Maybe I overestimate this dome issue with the CIS and someone can comment. But for hot rodding most go to carbs (a set of 40s might come to you for $1,000) or EFI. MFI is really great, but expensive and tricky, especially if you need it modified. Home brew EFI is a real tinkerers delight - look up Megasquirt. Maybe you can keep within budget with something like that, use the CIS intake minus the fuel injection part, and run a hotter cam and whatever larger Ps and Cs you can afford. But it is not off the shelf stuff you can just bolt together (carefully) and fire up. All this delays getting the car on the road.
Gears - first off, I'd use that stock SC ear 915 you have. Decide for yourself if the crunchy 1st is a problem. You only need first to get going. Certainly not on the track. I have never speced out a drag race tranny (or, for that matter, an autox tranny). But on a track speed from 0 to 30 or 35 is irrelevant, as no corners are slower than that. Some tracks have no second gear corners (using the term loosely).
Then, while driving around with your nice, mostly stock, motor and a stock transmission, figure out what it would be like cruising down the interstate at 60-75 driving to Watkins Glen or Mid-Ohio from MA. See what RPM in 5th you would be running at those speeds, and shift into a lower gear to approximate it. Hell, drive over to Lime Rock that way. See what you think about an four or five hours driving at 5 or 6 grand. Ask your DE buddies what they think they hit for top speeds in their stock SCs at the Glen. I liked my relatively cheap 7/31 with shorter 4th and 5th. Noticeably more poop to the car - my wife asked if I had done something nice to the engine. But some say they get tired of it cruising the interstate on the way to a track. We all are different.
You want to match your tranny somewhat to your engine. When you have your engine in your car you can go to a chassis dyno and get your torque curve. You can use that to determine optimum shift points. And if you do it with a spread sheet, you can play with gear ratios.
Anderson explains that ideally you want to size gears for each track and its specific corners. But this is impractical unless you are a sponsored pro or running a Formula Ford or the like. So you pick a likely top speed (and for a dual purpose car, a street/track compromise), and then space your gears so you run an approximately equal increase in mph in each. My track tranny has, for my tires and shifting at 8,000, a 60 mph 1st gear, an 80 2d, 100 3d, 120 4th, and whatever 5th I might like (150 nowadays). Turns out I shift at 7,600, but the spacing is the same and I've not driven Daytona to challenge the top end.
What gears? Well, look up what is available from the guys who make and sell gears. With enough references you can figure out what stock is. Here is one place you can get stock gear ratios (it will tell you what is in the two trannies you have)
http://www.rmrporscheclub.com/files/Chal_Series_Rulesbook_2006_final.pdf. Then you plug that into a spread sheet with rpms and speed for a given tire diameter and R&P (very few choices there) and see what you get.
And we haven't even gotten into the full roll cage you will want if you track a Targa a lot, nor what the suspension modifications will cost. The fact is you don't want to think in those terms because it all ends up costing too much for most of us. So you do it a bit at a time so you don't notice. And what if you decide DE isn't enough and you want to race? Well, you probably will have to take the mods out if you want to run in the stock classes. If you run with the modified cars, you'll get killed by guys who spared little if any expense.
Enough sermonizing on the virtues of patience and practicality. I have to get in my SC and drive 80 miles to talk to some guys about financing the building of a race track. Race seat is bolted in place and it has a full cage with low door bars, so I have to use the removeable steering wheel to get in and out. The shoulder belt doesn't work with this seat, so I use 4 of the 5 point harness. The suspension is pretty stiff. The 60 series tires are about the only thing that keeps the tooth fillings in place. Oh
Walt