Ref the knackered engine, If it's be run with no oil, I guess yor main problem will be b*ggered cylinders / pistons. Two things to remember - you can save about 60% on the price of new pistons etc by going with Mallory or Sierra (both aftermarket). Any decent machine shop can bore the block out, however check it's not been chromed or some other exotic cylinder lining first. other than that, whren I did mine I decided to preplace all "rubber" parts (seals etc) so you end up with an almost new engine.
You have the advantage of having another engine to keep you going while you rebuild it.... I can assure you running on the aux is not very exciting!