Marcus... Do you have a budget for the project? Are you planning on commuting / daily driving this one?
If it were my car and I wanted to go for all out economy, I'd probably look around for a used normally-aspirated 1.6 motor in good condition and go for that. If you can hear/see it run or vouch for the amount of miles it has on it, then you should be set for a good long time.
If you're going to rebuild, plan on some expense since it appears that diesels cost a bit more to rebuild than gas motors, especially if you need new pistons.
You'll also want to find a good machine shop that knows diesel heads and is equipped to bore 4-cyl VW blocks if that's necessary.
A nice 1.6TD would also be good in your rabbit and wouldn't really take all that much to swap in. There are minor wiring issues along with the fact that the exhaust setup is different. The TD will definitely have more power, but on the downside, they can be more costly to find / rebuild since there are additional elements such as the turbocharger to deal with.
Where I'm from (Ohio), there are hardly any of the "old" diesels let along TD's, so an NA might be your best bet.
As far as transmission options, there are websites around that can give you the trans ratio's of all the units VW produced. From that, you can get an idea of what code transmission you'll need to look for.
I also have a spreadsheet a friend of mine made that will allow you to calculate road speed and eng rpm in certain gears. Let me know and I can send that on to you...
The earlier diesels had four speed transmissions, so you could probably find one of those, however, I found them to make the engine seem to be working pretty hard at highway speed...
I have an FF trans (5spd) in my caddy TD right now and the ratio's appear to be pretty good for highway cruising. I don't think I'd want anything shorter, especially in the top two gears. Remember that if you're going from 4-speed to 5-speed in that car, you'll have to change some of the shift linkage components. It's not that hard and a donor junkyard car should have what you need.
That all said, you could also have someone here "make" you a transmission with the gears that you want (within reason). You could make a real "highway cruiser".
Mechanically, installing an engine and transmission is not that hard to do, but if you get stuck, there are plenty here that can help out. I might suggest that you locate /borrow an engine hoist which really helps out a lot when doing that sort of thing.