I would have expected the engine to last much longer than that after a fsh. it must have had a hard life.
I cleaned an old jag once that had done 300k all on the same box, diff and engine.
It's a pain having a car with no / blown engine sat around if you can't do the work, so I'd guess they'd take a cash offer of less than the start price for you to take the problem away.
Like everyone has said, you could change all the mechanicals, if you are handy with spanners why limit yourself to a 2.0 renault engine you could make this whatever you want! A day with some decent polish and a pc would have the body looking ship shape and whip those cracked fogs out and whack a couple of caf's in.
Wish I had the room / spare cash to buy it myself!