Im into my 205's, had one for my first car sold it and bought it back 2 years later lol.
It was a mildly tuned 1.4 xs with Gti suspension and brakes, embarassed a lot of quicker cars with that on track

Im actually building a stage rally 205 at the moment but im waiting for it to be sprayed by a mate so thats holding it up.
Regarding putting a 4wd turbo into one, it can definitely be done.
I remember seeing a wide arch 205 at the French car show a couple of years ago with a cossie engine and running gear in. I've got a pic at home, think it was in CCC a long time ago.
I've got a mag at home (PPC i think) with a 106 with cossie engine and running gear, built by DP motorsport i think. A1 rallysport do cossie conversions on Fiestas too I seem to remember, they seemed to be good value to me at about £20k on the road.
I dont know if you know but someone on the OC who is building an RS200 kit car based on a 185. There's someone near me with one too but with an impreza engine in. I saw it at the kit car show last year and the guy was telling me that it cost about £20k to build.
I suppose if you have the money, know how and facilities anything is possible.
Sounds like a good idea anyway, it'd be good seeing a standard looking 205 with a 2L turbo and 4wd!