1. if you go a RB20 you are wasting your time and money, yes the motor is cheap, but to install costs a bundle, and worth the extra cash to spend on a rb25det, as the extra torque.... and power possibiltys with this motor is alot better than the 20...., but to intall details, best to check out www.hybridz.org heaps of info there, basically you need new mounts,200zr sump and pickup, and electrics, and new brakes, ie budget around 8-12k if doing the work yourself.... and if you want it to be done right..
2. if it has visible rust, im sure that there will be more somewhere else in the car that you don't know about.... therefore costing more money... cutting the rust out of the car isn't a big $$ spenditure, if the bodywork then respraying that costs the money if you want it done right...
3. the original motor will have something of the 80rwkw mark, will be slow by todays sports car standerds, but an engine swap to a mild L28, with some nice cards, will boost it a bit, but won't be a rb25det...
my answers are pretty vague as well, but i havn't seen the car to say go for it or not, but it sure does look pretty good in that color.... another thing to realise that it is a 77, thou stil a Z, not as wanted as say a 70-71 240z, so the price should be adjusted for this as well...