Being you have a wagon, are you street driving, or any plans for something serious?
I honestly would say for something simple, I would buy either a set of factory 5.0 shorty headers, or get a set of good aftermarket pieces, but if you wagon isn't going to see a bunch of RPM's, I'd almost stick with the manifolds for simplicity.
As far as exhaust, I ran a 2 1/4" system on my '84 F150, though glass packs and some 4" 27" long tips. It was LOUD...lol...not something I would suggest to anyone ever again.
You could run a 2-1/4" exhaust, if you want to build it yourself, the flowmaster u-fit dual exhaust kit is the way to go, but you will need to buy some new hangers.
As far as mufflers, that has been debated and will continue to be debated until we are all dead and buried and our cars are long rusted away.
I am running the FM u-fit kit, 2.5", I used the H pipe from the kit, and 70 series flowmasters, and ran the exhause out to the back. I had a bunch of NOS ford hangers, and used them.
Being you have a wagon, that gives you some extra room.
On a stock setup, I would not go bigger than 2-1/4" on the pipe. An H pipe is better than no cross over at all, but you could probably find something for a mustang that would work.
Here is how mine sounds:
