I could buy a 'shed' & do it up, I have access to a couple of great mechanics & the highest discount from places like euro car parts, not to mention a painter that will do any bodywork, so I can get things 'on the cheap' so to speak.
No no no no no!
Either buy a minter if originality's your thing (ie, 30-40k, FVWSH) or a car that someone else has already done and done well – occasionally they do pop up on the likes of CGTI. Start going through a car properly and you're very quickly into big money – even a cheap MK2 build would run to a fair whack:
£1500-£3k for paint, depending on how good a mate the painter is and how good you want it.
£200 for shocks and springs if you go for the budget end of things.
£500+ for rebushing all the suspension.
£500 for a cheap ABF swap with you doing a lot of work yourself.
Probably £1k if you pay someone else to do it, go for the MK3 Gearbox (02A I think) and have the MK4 shifter fitted to get a decent gearchange and a box that will take the power.
Silly bits are now big money – some of the body kit parts aren't available from VW any more (or GSF, ECP etc.), so you need to buy a complete one from GPC.
Easily another grand in there for silly bits – dynamat, dinitrol, replacing parts that don't look right now the rest of the car is mint and shiney etc. Beyond that, it can easily suck up HUGE amounts of spare time – I've got a MK2 GTI in my shed that's needed a few bits of tidying up for a VERY long time now (painted, but needs some electrical work doing etc.).
Spares are generally available for old Mercs and VWs for a good amount of time – VW guarantee you can get the lot for 15 years, but plenty of MK2 parts are still available. Merc certainly used to have a policy of discounting older Merc parts as a bit of a marketing ploy to make the cars look long lived by encouraging maintenance.