Flush or transplant?

Ok. As some of know the eccentric in my 318 is loose requiring me to pull the front of the engine off to tighten or replace it. Well, yesterday I took off the water pump and pictured below is what I found...
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A little history on the car... This car was drag raced back in the 80s/90s but was bought off the track 20 years ago and has sat since then.

My future plans are to build the 318 like the 400hp 318 that hotrod magazine did but that will be a few years yet, I was planning on getting the car running, driving and stopping good then doing the body work and building the engine. But now finding all this crud I decided I'll ask some advice... Would ya 1. Flush all the fluids in the engine and run it? Or 2. Buy a running 318 and swap it in and keep the original to build?

I haven't done any compression tests or anything to this engine but the oil in it is clean and the engine runs good with gas pored down the carb and just roughly timed. Let the opinions and advice roll :D