I mob... sorry fat fingers and touch screen I get lazy.

Can u explain more about how the chip works? How much more will I complicate the process if i eliminate the ignition barrel completly?

Inside the head of the key there is a 4C carbon chip which is coded to the immobiliser box, the box immobilises the engine until it recognises the correct key in the ignition. There is an antenna the comes from the box and goes around the ignition barrel so if you are going to be using it you will need to fix the antenna around your existing barrel, also the Camry key is a different profile key, if you look at that key and your MR2 key you will notice that the groves on the keys are different and the Camry one will not go into the ignition on the 2, to get around this you will need to cut the chip out of the Camry key, and put it in a blank that is the correct profile for your car ( TOY38R)
I can get the blanks and they should only be around $20 cut to your key. You should also make sure that you have a spare key because you won't be able to get more coded into your car as coding for these is done through a sequence of turning the car on/ off, opening the doors etc, though there is another way of making a key from the immobiliser box.
 
Really I would think that your best bet is to either run an aftermarket ECU that eliminates the factory immobiliser or, be a little dodgy and glue the chip to the antenna and stash it behind the dash, so the car will always see the chip.
 
Hope you understand what I mean.

Wiring half done.