40mpg may be ambitious in a car at this price given they'll be a bit older, and fun + economy in equal measure is difficult to find.
What about the finest small car ever made? The Mk4 Ford Fiesta? Get a good zetec one in Ghia trim preferably, fun, good handling, well made, economical and now going quite cheap. I dont know where you live so i used Wimbledons postcode for AT LOL!
Here is an example. http://www.autotrader.co.uk/classified/advert/201128401936944/sort/priceasc/usedcars/price-to/1000/model/fiesta/make/ford/keywords/ghia/page/1/radius/1500/postcode/sw195ae?logcode=p
The 1.4 is also quite peppy and theres a few around for this sort of price. Ive seen at least 8 on autotrader in various locations worth a look.
The 306 is a nice car on the outside but its dashboard layout is very dated and haphazard and theres some nasty high milers about now on them, specifically on the diesels.
Ford Mondeo Ghia X may not meet the economy request but if you get the 2.5 V6 it is good fun to drive, and going quite cheap now, lots of car for not much money.
http://www.autotrader.co.uk/classified/advert/201122389455592/sort/priceasc/usedcars/price-to/1000/model/mondeo/make/ford/postcode/sw195ae/page/3/keywords/ghia%20x/radius/1500?logcode=p
Renault Clio RSi 1.6, i drove one of these a while ago and it was quicker than its figures would suggest. Not many about though for that sort of money.
http://www.autotrader.co.uk/classified/advert/201107379914587/sort/priceasc/usedcars/price-to/1000/model/clio/make/renault/keywords/sport%201.6/postcode/sw195ae/page/1/radius/1500
What about a Red Sports Car?!? Peugeot 406 Coupe, i bought and sold a 3litre model which went like hell, the 2.0 doesnt have enough grunt considering the cars weight but definatley falls into the fun category and isnt a million miles off your economy requirement. But again, not a tremendous amount of them around.
http://www.autotrader.co.uk/classified/advert/201126395697149/sort/priceasc/usedcars/price-to/1000/make/peugeot/radius/1500/page/1/postcode/sw195ae/keywords/se?logcode=p
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