Its about 1:30AM here. Just got home from work a short time ago. I wanted to get this note done while the train of thought is still in my mind.
I have been following the videos that you've done on getting this car, going all the way back to last fall. I watched the videos that you posted last week, of all of the parts that you've located for this car, and then your other video, where you laid out your plans and objectives for the car.
Right up front, I want to say that its your car, and what you do with it is entirely up to you.
You're right, when you say in your latest video that the condition of the engine really sucks. I know you had your hopes up (as did most of us), that the engine would be in better shape than it is.
The way I see it though, I don't think that this should really keep you from achieving the objectives that you laid out in your video from last week. In the video that you did last week, you said that you wanted to do a 7/8/9 day thrash on the car, to see if you could bring it "back to life". You said that you were on a really tight budget, and that you couldn't afford a good set of tires for it, and that you couldn't afford to register and put plates on the car. That would suggest to me that getting the car back to a roadworthy status was going to be a long-term goal for you. That also suggests to me that you weren't looking to have the car running really well, or for a really long period of time. You were prepared to clean up the engine, install a new timing chain and gears, and to reseal the engine. I understand that the engine has some issues (cam and lifters, rear crank journal, etc.). To me though, even with those issues, it could still be brought back to life. It doesn't have to run well, or for a very long time, it just has to run, and I think that if you stick with your original plan, that's still possible. You always intended to redo the car up to your usual standards at a later date anyway.
As for the other work that you wanted to accomplish on the car (frame/body swap, overdrive transmission upgrade, fitting the replacement front sheetmetal, header panel, etc.), I don't see how the situation with the engine would affect any of that. By doing the other work that you had planned to do, you could find out if there are any other issues, or parts that you need to source for the car, and that would give you time to find any other stuff you might need, as time and money allow.
I guess maybe I'm being selfish about this, but I was really looking forward to seeing what you could do with this car. Its a big challenge, but if anyone could do it, I think you can.
Anyway, its late, and that my $0.02 worth. Call me crazy, but I think its still possible.
Whatever you decide to do, please keep us updated. I for one, want to see how it turns out. Good luck!