I have seen a couple of S2's with a Fuego Turbo engine swaps, they where done when the engine was still in production and mainly because it was a relatively easy swap for an increase in power over the original - they weren't tuned much from original either.
Aside from the fairly easy install (As you said, engine and gearbox can be used from the Fuego) I would agree with Clifton that there are much better engines to choose from now that will give the sort of power you are aiming for and with far less effort and head scratching!
Again, as Clifton has suggested, the Ford Zetec range of engines is a good choice. All sorts of different options available and parts (both standard and tuning) are easily available. 1600cc n/a Zetec/Sigma engine is capable of over 200bhp and is a relatively light weight engine that would compliment the Europa quite nicely for example.
Over here, if you are tuning a Ford engine, one of the most useful sources of parts and information is Burton Power - online catalogue, extremely useful guys that know their stuff on the phone when ordering and they can even advise which parts are interchangeable from other engines for various tuning paths using stock parts etc...
Ultimately if you wish to go down the Fuego Turbo engine and Gearbox route then it doesn't really matter what anyone suggests as that is what you want to do! The install is possible, I have no idea how easy it is to buy standard parts (Fuego's disappeared over here a good few years ago so they aren't even seen in scrap yards for example!) or if there are many aftermarket tuning parts available (as opposed to the vast range of Ford original or tuning parts for example). I'm sure it will make an interesting project - especially with a modern Turbo and intercooler setup. Also consider what the gearbox and driveline is capable of handling if you are aiming towards 250+ bhp.
Whatever you choose to do, please share it and put lots of pictures up!