Hi Jim, if you are keeping the Leggy stock and boosting the L this is what I would do.
Put the good 2.2L block in the Legacy, it will bolt up fine. Get your gaskets from www.1stsubaruparts.com
. Keep it stock and put some cash into the L.
With the L decide first if a WRX swap will be better. It probably will be. If you decide to keep the L with a non WRX engine, get some 2.2L turbo pistons and rings and install them into the otherwise stock block. This should allow you to run about 14psi which will probably get you around 280hp or so. 10psi will be safe for many thousands of miles and will probably give you most of the performance you are looking for. You can also get an upgraded clutch disk, but keep the clutch otherwise stock so as not to blow the tranny.
Figure out your AFI setup including engine management. I use E-Manage as do a few other board members and we have great luck with it.
At this point you will want upgraded brakes. I have some 98 RS brakes and they seem to work pretty good. The upgrade set me back only $60. You will also want a good suspension. Springs, struts, sway bars and polyurethane bushings.
It's possible to spend big money on this or you can keep it a little simple. Either way, it makes a good car a great car and you'll have fun educating "sports" cars.