easy answer is YES to both...I did it and it was a very fun car. This was the set up in my car..Torque chip II, 2.5" turbo back exh (no cats) custom job. vf119 IHI turbo @7-8 psi ( size of the S-13 turbo), j-spec 98 wrx intercooler, blitz sbc boost cont., blitz full auto TT, light flywheel and upgraded clutch, sx fuel reg, sport springs, and ink. racing etroia's w/ nitto rubber. The car moved pretty good and I handed a few wrx's there asses before they started to mod them. but in the long run you would be better off doing a wrx swap from I-speed. less to worry about and its smog legal, even in california. 7k or so seems high but look at the prices for a good RS turbo kit 3500-4???. then the price for the extras like exhaust and something to control the fuel/timing if I remember the torque chip wasn't cheap. Now add in the cost when the engine gives out and you have to rebuild it or give in and do the wrx or sti swap....I will say my set up was a kick in the *** and I was putting down 1.8 60ft times and got a 13.9 at 101 at 4700ft or so, but the car had no top end every race I lost on street or track I had to be run down. the turbo spooled up so damn fast I could be doing 70 on the freeway and be at 0 manifold pressure and thats just holding the gas steady.
all in all go for the swap..the older RS is a few hundred pounds lighter than the wrx and the wrx motor can be upgraded more and it responds well to light upgrading.

 

pistons/rings and rods are not the only thing to upgarde, but it will help. A lower compression piston will help you run more boost and help the detonation problem . you will need to up your fuel system and pull timing. so unless you want to use a stand alone or some good piggy back componants like the SAFC and use upgrade the ignition with an msd box that has the boost retard set up. It all really depends on you budget...now remember a good RS turbo kit will run you the high 3k to low 4k range plus the other stuff you want to do..Its been awhile since I've looked but I remember the pistons and rods for an rs were like $700
Dollar for dollar if you want the thing to be as "safe" as it can be it be better to do the wrx swap..that and the wrx swap will be 50 state legal, where the RS-T you will be very lucky if its legal.