Ok, I'm gonna start at the top and break things down for you.
1988 was the last year of SD (Speed Density) for the Mustang. In 1989 they went to MAF (Mass Air Flow). So, your husbands car is indeed SD.
The stock cam in a 1988 5.0 HO is hydraulic roller. The E303 camshaft is hydraulic roller and will work just fine with the GT40 heads. Personally I would go a little larger on the cam, but I dont know what you are looking for overall. Honestly though, for the beginner the E303 is a great cam with good driveability.
Your motor should have 16 individual hydraulic roller lifters. The lifters will be held in place by a "wishbone".
Here is a link:
http://store.summitracing.com/partde...0&autoview=sku
You can buy stock replacement hydraulic roller lifters from Summit as well.
If your husband wants to run 1.7 rocker arms I dont see a problem with that at all. 1.7's will really help the E303 cam out alot. Just check to see if the GT40p heads require pedestal or stud mounted rockers.
I like my Comp Cams Pro Magnum roller rockers. But for working on a budget the Harland Sharp rockers make a nice piece.
You will want to check for proper pushrod length when changing the heads, cam, and lifters. Summit sells a tool for the job, it doesn't cost much, but it will save you money in the long run so you dont buy the wrong parts. A Summit tech can explain how to check for pushrod length much easier than I can type it out. So when the time comes give those guys a shout.
Good luck! Let me know if you have any more questions.