Rebuild engine or buy a new one?

[Bonzo]

Personally, I would be very reluctant to spend a pile of wonga on an engine that is not my first or final choice.

I have found from past experience that engine rebuilding often turns into a money pit

The list of work that you have proposed will cost a fair amount of money + you'll probably need extras such as new water pump, timing belt tensioner, spark plugs, clutch ??
The final list could be endless !!

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Here's some food for thought

If a brand new Zetec engine is out of reach at the moment

Why not have a look arround locally for an earlier Mk5 escort fitted with the 1.8 Zetec Silvertop engine. ( J, K, L reg, )
A J or early K plate will most likely not have PATS fitted, this may open the way to using the Escorts ECU ??

A MOT failure would be ideal & should not cost you a fortune

Remove the engine, loom, ECU, etc. Take the remains to the breakers, probably get at least £50 for it.

The 1.8 Zetec Silvertop is not a bad budget choice.
Alloy sump that could be used, as is if you wanted
Lighter flywheel than the 2 litre version
Fair bit more power than the CVH if you mangage to find the 115BHP GTI version + a little more power if you fit it with a pair of 2 litre cams

Once you have fitted a budget Zetec, the swap to a later Zetec 2 litre Blacktop shoud be a lot more straightforward as most of the hard work has been done + you'll have the parts needed for Blacktop conversion to hand