Many thanks for all the suggestions, and especially to Giant for his clarifications - very helpful.
Yes, the boat's on the canal in Edinburgh. Even if we'd bought it already, opening up the original engine wouldn't do me much good if I did it myself! Except it would be a chance for me to go 'ah, so that must be what cylinders look like', and so on.
The current state of play is that we've told the seller we think his asking price is substantially higher than it should be given the lack of a working engine (and a few other considerations), but we're still interested in principle. He was obviously thinking of the engine replacement as being much cheaper than the £5000 someone suggested early on, let alone the £8000 Mike suggests. That kind of budget on top of the current price would clean us out, so we'll have to see if he's ready to bring it down to a level that would justify that much additional time and money investment. Although there's obviously a wide range of opinions about how much time and money we'd need to invest here...