If you want a fast car, some considerations to how fast.... you want to be half a car length in front of a stock euro car from 0 - 80kms p/h or do you want to be faster than a modified euro car (BMW M3) or further in-front to attract the police.... 
 
You might want to think about how much the euro car that your competing with costs, then aim your conversion budget towards that.
 
MR2 engine swaps have shown impressive with v6 conversions, running on lower octane fuel, lighter engine.  You want to be quicker than most cars then a 2Ltr modified K20 swap.

If your heart is set on wanting turbo fun but keeping your shell do your sums as it might be worth buying a turbo mr2.  Engine opinion, Gen 3 half cuts are usually more than a Gen 2 turbo half cut or smashed car (big thing to look for is lsd with the gearbox, the necessary driveshafts).  If you get a gen 2 and mods (220rwkw), its turning out more power than a stock gen 3 at a similar cost.
 
If your going for a conversion, dont forget to upgrade your brakes and other aspects of the car. 
 
Wish you well

First thank you for your thorough layout opinion. Atm am kind of attracting police with the exhaust came with the car from previous owner, kinda loud. Bt sounds good. I have considered v6 bt afraid it may affect the power steering n cruise control. N k20 or 24 they are not toyota. I was thinking of getting gen 3 half cut cos it has everything I need for a conversion. N maybe rebuild the engine before I install. Bt I don't know the advantage or different btw gen2 n 3 plus am not mechanical oriented. Anyway much appreciate of Ur opinions. Ta Edward

My understanding....

The short version....

gen2- dumb Air Flow Meter, small 440cc side feed injectors, no oil catch can, crappy graphite head gasket, low psi fuel cut, egr system, 200hp
gen3- smart MAP sensor, bigger 540cc injectors, oil catch can, MLS head gasket, higher psi fuel cut, better cams/turbo/intake mani/tb, 245hp
gen4- 570cc top feed injectors, COP ignition, cam/crank sensor, integrated turbo, higher compression, bigger tb&side feed intake mani, 260hp

The long version
Courtesy of user DavidV (David Vespremi)
- MAP sensor instead of AFM
- Bosch D-Jetronic (Gen III) vs. L-Jetronic (relatively primitive) engine management
- CT20b turbo replaces CT26
- Boost raised from 10psi to 13psi
- Fuel cut raised from 12 psi to 18 psi
- Different ECU
- 4 wire O2 sensor
- Shim under bucket valve shims
- slightly more aggressive cams
- Revised internals (pistons, con-rods etc.)
- Revised cylinder head cooling passages/water jackets
- Revised intake manifold (8 'independent long ports' reduced to 4)
- intake manifold inlet air temperature sensor added. i.e. after turbo and intercooler.
- Revised gearbox with close ratio gearing
- lower compression ratio
- stainless steel head gasket
- factory 540cc injectors replace 430cc injectors
- revised fuel rail with bigger bore and relocated pressure regulator
- TVIS eliminated
- EGR eliminated
- LSD in 80% of them
- throttle body increased from 55mm to 60mm
- inlet valve lift increased from 8.2 to 8.7
- intake manifold inlet air temperature sensor added
- Less restrictive exhaust elbow
- Aluminum oil pan
- more rigid alloy sump and additional oil baffles
- Factory Catch can
- Better Oil Cooler and relocated oil filter (bottom)
- 4 Channel ABS coupled with Traction Control available
- No. 1 compression ring described as 'stainless steel' instead of just 'steel'. Oil ring is described as 'stainless steel' instead of 'a combination of steel and stainless steel'.

Basically a lot of difference. Easy way to tell the engine gen is if the oil filter is under the engine / sump area (gen 3) or oil filter next to exhaust manifold.

Lots of people choose the gen 2 to modify. New gaskets, piping and service items $1500. New fuel pump $250, fuel rail $200, fuel pressure regulator $250, 800cc injectors or larger $1000, new ECU $2000, new cams and cam gears and valves and head work $3000, new intake manifold $1500, new intercooler or w2a $350-$1500, new turbo $2000, new exhaust manifold $1500, big brake upgrade $2000, plus many other bits depending on build preferences to lightening components or increasing to 2.2ltr for earlier boost in the rev range... Your now a gen 2 with around 400hp - 500hp. Doing all the same mods to a gen 3 engine will equate to about the same outcomes in hp.

Hope that helps

Just get a revision 3 3sgte engine ,less hassles easy to install. l know of a good one available if interested (melb)
Cheers Charlie.0411288027

Also keep in mind that if you wish to do an engine conversion and have it engineered in NSW, the new engine must at least be the same age as the car (or newer) 
I think you would get away with a Gen 3 as they were fitted from 1994 - 1999 in the SW20. (Gen 2 1989 - 1993)
 
Unless you are emotionally attached to your current N/A just sell it and buy a car with the engine you want already fitted.