Can I do this?
 

I was wondering if it is possible to put 3rd gen engine into a 2nd gen body. If that is possible, then can you put a 20b into a 2nd gen?

Yes, it is possible. And yes, that is possible.

That's some interesting logic that you just used there. The fact of the matter is the FC accepts the 20B far easier than the FD because Mazda built it to be at least somewhat compatible (A 13G was fitted to an FC back in the day to guage interest). The 20B's oil pan even fits, which is pretty incredible considering the engine is 160mm longer, and all that.

The 3Gen engine doesn't fit very well because it uses strange mounts, but anything will fit with enough fabrication. ;) It's probably better to use a JC Cosmo 13B-RE engine instead.
www.2751engineering.com

Yes, a 20B will fit into a 2Gen RX-7, but getting it to work well, and building the car to take advantage of the increased torque is quite a chore. This 20B FC is for sale for much less than it would cost you to have one made:
http://www.cris.com/~Asam/20B.html

The 20B oil pan does not fit an otherwise stock FC because it hits the front sway bar.

Ok thanks that does help. I was also looking through the other threads yesterday and saw some people asking similar questions. The idea that I am getting from some of the sites that you gave me though is that it isnt really worth the cost. But it sounds soo fun. So I am wondering if I should try to save for it.

If you want to work yourself into higher horsepower, it is best to take one of two routes:
1) Non-turbo route: Have your local race shop install and tune a standalone EMS, have your NA engine ported the next time you have it rebuilt, and add a good exhaust system. Approximate pricing: $1,000-1,500 EMS, $500-1,000 EMS installation & tuning, $2,200-2,600 engine rebuild with street porting, $800-1,200 full exhaust system. This setup will last you about 100,000 miles, and will out-perform a stock TurboII at sea level.
2) Turbo route: Sell your car and buy a TurboII. This gives you more horsepower and torque right off the bat, and you have a stronger driveline to handle more modifications that you can add later.

Normally, I would recommend the non-turbo route, but I think the turbo route is best if you plan to stay at your current high-altitude location.

Whoops, you're right. I forgot.

alright then. I have been looking at TII's lately. It is just hard to find one in good condition around here. I think that in my financial situation it would be better anyways. Thanks for all the help.