Downshifting:
1. shift into first' easily done when matching the engine rpm to the transmission need for rotational speed. Yes 1st gear is not synchronized. it is a skill that is relatively easy to learn.
2. shift down to second; what do you mean by useless?
3. A change of transmission will almost always require a driveshaft of a different length.
4. I have used a T-85 overdrive for many miles without problems. Some trips have been well over 2000 miles in duration. Despite the manner of the mounting the shifter, it has been easy to shift up and down. Any mechanical device will only operate as it was designed to do. It will not bend to your uses just because you find dislike how it operates.
I would think that you realize that while in overdrive the transmission will freewheel when not accelerating and have no "engine braking".
When in overdrive the procedure of momentarily backing off the throttle above ~27 mph you will shift into overdrive.
Changing to a mustang 4-speed will give you the same final drive rpm as a non-overdrive 3-speed or the O.D. when not selected into overdrive.
The input shafts should be the same length, but you will want a narrow pattern case to bolt to your bell housing. If you do not have a narrow pattern you may be able to drill your bell housing in a wide pattern. That
part I am not sure about is drilling the bell housing. You will need to compare the transmission face of the wide pattern to see if there is sufficient surface to re-drill for a wide pattern.
You will need an after market shift mechanism and remove the original shifter. One complaint I have with the original shfter is it is mountde to the floor-pan of the body and not directly to the transmission. As the engine torques over under acceleration the the shifter does not go with it.
If you use an aluminum case to loader from say a 1980 ford pickup or Fairmont it is essentially a three speed with fourth being overdrive. The caveat with the the aluminum case is the shifter position. Depending on the original installation the shifter will be either forward located or rearward located.
A 5-speed T-5 transmission can be mounted. It would require an adapter between bell housing and transmission. You will need a different clutch disc to match the spline of the T-5 input shaft. The shifter may require an aftermarket or modified shifter to locate the shifter in an easy to use fore and aft location. Additionally the shifter will not likely "fall to hand" and require a modification to the transmission tunnel. Finally a new or modified carper may be needed for aesthetic reasons.