How many years did he get? Never know. He might want it back.
Sounds like a good movie plot....
Alex,
Welcome to the sight. Your project is hitting pretty close to home. I've got a '62 3/4 ton step side IH pickup I thought about doing the same thing with. I really like the looks of those old '60s IH pickups. I ended up keeping the Ford as is though. The 266 in the IH pickup runs really well.
As far as the rig your looking at...it's a tough call. If the IP is leaking from anywhere except a hose fitting, you'll probably need a rebuild. I think fellas here have found rebuilds for $300. I had one rebuilt for $450. $400 - $500 seems to be the going rate. Your blue smoke could be alot of things. It needs an oil change, fresh fuel, and a days worth of pulling a load to see if it'll come out of it.
If you're planning on using the drivetrain from the F350 on your IH, you're probably money ahead by picking up the F350. Around here that D60 front is going for $1700 fully dressed out and the rear would be around $500. I can't remember if the 90 is a king pin D60...if it is that's another bonus. Also, it's sometimes a little difficult to find a SRW D60 front.
With you doing the swap it'll be nice to have all the wiring and clutch assembly right there. Another bonus to having a complete pickup instead of piecing it together.
All in all you're looking at a lot of work to do your conversion. It's easy to get discouraged when you're doing a build like this. If you've never rebuild an engine like this before, you may want to keep looking for a rig that's less questionable. You could do your build in stages. Find a 2wd pickup with a 5 speed that's got a rough body then just install the engine and tranny...keeping the divorced setup on your pickup. Then once funding is back to where it should be, look for your drivetrain. IMHO you have more options at a cheaper rate running that divorced transfer case.
The other nice thing you have going for you now is scrap prices are really high. You'll probably get something worthwhile for the carcass when you haul it in.
Any way you go, good luck and keep us up to date on your project.
Paul
after looking at a friends pickup and figuring rad mounting and a few other things i came to the conclusion that it would just be easer to put the cab and box on the ford frame plus suspension and steering parts will be a bit easer to get and i can keep the rear anti-lock. And if the engine situation continues I'll just threw in some new rings and get another 100k maybe while I'll save up for a full out rebuild! I have been around IH engines all to long its easy to get another 40 -80K out of them some duct tape and bubble gum 
