I gotta say Im not too familiar with the 1.6's turbo capabilities as most of my research and measurements have been done for the 2.0L
From what I can tell seting up the turbo like this could work, worse case scenario is an oil filter relocation kit, it is kind of in the way but as you said, if you can take it out easily then leave it there. The oil return seems a bit low, you could use a small pump to push the oil back into the pan or maybe a smaller turbo would yeild better clearance.
My prefered engine management is Megasquirt. You do need a new coolant temp and intake temp sensors that work with Megasquirt, they are GM sensors and the part numbers are found on megamanual.com. The other sensors should be readable by the unit. The nice thing is you can get rid of the MAP sensor because it has a built in one.