You cant use that AX5 tranny. I wouldn't feel comfortable with the Dana 35 either. The TC will handle it fine, but depending on what Transmission you go with you will need to change the input shaft on the np231. If you put in an AX15 it can handle a V8 and has an output shaft that can fit the input shaft on the np231 if you change it, but you will need an adapter plate from advanced adapters and they charge a lot for those. I dont know if there are bellhouses from anything else that will mate an AX15 to a V8. Maybe the bellhouse from a dakota with a V8, but I am not sure if they used an AX15 in their V8 models or not.
Complete rebuild axle/engine/everything swap in progress:
Parts already gathered for assembly: 2001 Ford 302, 1990 Mustang GT 5.0 ECU and wiring, NP435, NP205, Pair of axles from 04' F350 SuperDuty (Sterling 10.5 Posi rear, Dana 60HP Front-Both Disk Brakes 3.73 Gears), 37" H1 Tires, 9" lift TJ Coils for 2 link conversion in front, Stage 2 Clutch Kit, 3 Row Aluminum Radiator, Chevy Astro Steering box (4" front Stretch), XJ Rear Leaf Springs (6" Rear Stretch), and lots more.