it has been done before, both with the 8v and 16v 2litre engines, as far as i know theres loads of cutting and welding just to make enough room and then as DH noted theres only room for a baby gearbox, however, the polo saloon was available with a 1.6ohc engine which although its a 1600 is from the same 'big block' family as the 2litres..... but the saloon was a 9n chassis, just like the seat ibizas from the same era which come with the 2litre engine already in.
So, having wondered the same thing when i had more mk2 bits than mk2's to fit them to the answer is yes, its possible but so is almost anything for that much effort, and don't bother, buy an ibiza GTi, esp as that will already have suitable brakes, suspension and a hundred other little bits that otherwise you would have to make.