Hi Richard,
And thanks to Fen for bringing your posting to the top of the pile. Again, sorry you haven't had more replies a little sooner.
I would agree completely with Fen's comments. I have a Gurued 220 Turbo, which, when on boost, goes like the clappers and is totaly devastating on open roads. Prior to that I had a Lux (2.5 ltr 8 valve non Turbo); in town and around the twisty bits it was, if anything, more nimble and easier to drive at a pace than the Turbo though it had approx 2/3rds the power.
An S2 will give you the same power as an early Turbo but with far better delivery. If you are happy to stick with a standard 944 (which is without doubt a very good car in standard form) go for a S2.
The thing with the S2 is that that is it, there isn't much you can do with them. A turbo on the other hand is a Pandoras box of possibilities. Whilst I'm not aware of one in the UK, there is potential for 500+ bhp out of a Turbo. [

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Another thought, with your proposed budget you are on the brink of 968 territory. For another couple of thousand, you could be in the market for a newer car with all the development of the last, and best 944's plus a bit more.
I've never driven an S2 or a 968 so I can't realy make a comparison, but I do get considerable pleasure in exploring the short commings of my Turbo and in considering ways (and in part implementing ways) to make it better. I enjoy the fact that my Turbo, whilst looking original, is one of a kind and has been modified specifically to suit me within the constraints of my budget.
Which ever route you choose, buy wisely and you whon't be dissapointed.