Scott;

The rabbit's 1.6l head won't fit on top of a 1.8l block.  You can put
the 1.8l head on top of the 2.0l block when you get to that stage.  But
I don't see any benefit at all in working with the 1.6l.  The 1.8 will
fit just as well and would make a fairly easy swap up to the 2.0 when
you want to go there.  The 2.0 block is a little taller than the 1.8 so
you'll have some issues there.  Audi made a 2.0 block dubbed the "bubble
block" that is the same height as the 1.8 - you may be better to go for
that.

David Marshall has great data on the inline 4 engines on his website:

www.volkswagen.org

To summarize:  I don't see any benefit at all to getting a 1.6.  As a
side note the 1.6 probably had its coolant outlet pipe in a different
position than the 1.8.

Also if you're interested in a 1.8l longblock I have an excellent one in
my garage - it's a 1.8l JH with only 60k miles on it; runs like a
champ.  It's in Salt Lake City and I'd want $350 for it.

Good luck!

Damian