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Where there's a will there's a way-relocate the battery.This is how I'd do it, except I'd have some heat shielding around the filter and box it in still using the standard cold air feeds.
Did you get any quotes to rebuild your existing short engine/s?Unless you put a rod through the block or trashed the crank then you could have done it for not much more than the price of the 2nd hand engine + getting the belts done.
So did the seller tell you that he was going to swap the exhaust and wheels over or reduce the price to reflect this?If not then he has your wheels and exhaust and should do the decent thing and give them back.
It does sound pretty much like that.Think he'll be selling it off cheapo then.I'm tempted to buy it back him(used to be mine) to use as a trackday toy but don't have the space :(.
http://www.youtube.com/watch?v=gXjmMpvtxc4&context=C46d280bADvjVQa1PpcFOzajg0bG_BBsXu2yMTzhSTXz894GQQKXI=
Its on my brothers ph1 172.Doesn't sound too healthy to me.
You don't need an MOT to have insurance.It might cause complications if say you had an accident as a result of brake failure but for sitting in a garage its not needed.Plus you can just insure things for fire and theft ie covered for the worst but you cannto drive it.
Sell yours and buy one with the mods already done for probably the same money(modded cars never keep their value as well as standard) and no need to spend £3k.