Refresh or Rebuild: One Cooked 4.0

If it were me, I'd put the head on now and not worry about #2. Motors run plenty long with worn bores. If there's no galling or aluminum stuck to the bore wall, I'd just go with it. It may eat a bit of oil, but my wife's 276k 4.0L in her TJ gobbles up a quart every ~2k miles and it still hasn't ever stranded us. I'd trust it to go on down to mexico and back tomorrow if we had to.

In the meantime, knowing the shortblock is worn, I'd be building a new one. One that's been overheated/abused and may have hidden issues wouldn't be my first choice for a rebuild anyway. Even if everything seems mechanically OK, you never know what you'll find later. You may find nothing - but it can cost a bit to get to that point.

Take some of the money you've been using to pay off the newer car and put it toward a rebuilt shortblock/longblock/stroker or your own build if you can find a local shop you trust. That way, within a year you can have a 'new' motor in there and you'll be good to go. You'll also be paying into parts/goods rather than into interest, FWIW.

Since the vehicle has high miles, despite looking in very good shape, you'll also get a chance with the 'refreshed' motor to figure out what else may be lurking or need repairing. IMO, there's nothing worse than taking 6 months to get an engine 100% rebuilt, only to find you needed new axles and suspension right after putting it back on the road.

Worst case, you get it together and blow it up - all you're really out is some time and a couple gaskets. Everything else will swap over to a new engine if/when that time comes.