Welcome to the site. I think you will find that most people here started on dirt bikes and then migrated to buggy's for one reason or another. Some for a safer ride and others to include the family. No matter the reason, buggy's are a lot of fun.
A 1600 will be fine for the trails but you will need some more power if you want to start going up hills or running bigger tires.
As for the tranny, a 3 rib with 31 inch tires is a great set-up
I should also mention that there are a lot of great buggies for sale much cheaper than you can build one. I am not sure if starting from scratch is the best approach. Here is the buggy I would buy if I was just starting.
http://www.woodsbuggy.com/index.php?option=com_jfusion&Itemid=43&jfile=viewtopic.php&f=23&t=7677&p=111354#p111354