I've seen a lot of cool D110 drivetrains under series rovers. They really are the best of both worlds.
Sounds like you've got a good base to start out with. As Mercedesrover said, the 6 cylinder 109s have the more desirable bulkhead that has more room in it.
You can procurean entire 110 chassis, suspension, and axles. I consider this to be about the best way of going about the business. Also, this chassis has provisions for a power steering pump

.You drive a 109...you know what I am talking about...
I would recommend some sort of American engine and transmission. It seems a lot of people are having problems with the R380. Either that or go with the ZF auto. The auto seems to be bulletproof if you are wanting to go with rover stuff.
The 35k is WAY too expensive. I think you can just buy a good used 110 for a little more! Get ahold of Rovers Down South. George seems to be good at complete drivetrains.