Survivor car

I'd say that the rust on there is fine for driving around, in fact it gives it character. It's only when there are holes you can put your fingers through that it should be repaired, IMO. Even though the body isn't perfect, it's still better than 99% of the other unrestored cars out there which makes the car something extra special. Very few cars still have their original panels, never mind their original paint and there are less and less every year. as someone comes along and want's to make their car "like new" or "show quality" and then erases all the car's history and character.

Personally, if it was my car, I'd keep going on bringing back the original paint and then preserve as much as possible.
Since the engine is out, I'd pull the oil pan and heads, check the bearings and cylinder walls, and if they look ok, I'd just re-seal the engine, install new freeze plugs and use it as is. I wouldn't even paint it, just carefully clean it.