You seem to be torn about keeping this car. If you might want to sell it, why would it be worth the time doing a retrofit of a modern engine? You sound experienced with this sort of thing, so you must know that these kinds of modifications take a lot of effort to get everything working right and not looking like a complete mess. Even if you do a really slick job and it works well, it may be harder to sell and bring less money than a stock restoration.
I'm not a complete purist. If someone wants to build a street rod out of a 170 that's their choice. But that does not seem to be your goal. On the one hand, you say you don't want to rebuild an engine, but you are willing to engineer a transplant of the complete drivetrain including rear axle from another car which to me would be far more challenging than going stock. I realize the labor/cash factor comes into play, you may be able to put a ton of time into it but not the money for the stock engine and rebuild.
If you are willing to go Diesel with an original style engine, you might find a running OM 636, used in the 180D until 60-61?. You would have to change the oil pan and maybe some other parts, as well as converting the whole car to 12 Volt. Actually now that I think of it. I know of one that was set up and installed in a 170 that is available. It's in Canada, and I think it was running when removed.
By the way, on the gas tank, you can send it to a Gas Tank Renu franchise and there should no problem getting it cleaned and lined.
Henry,
If I got the car running, there's no way I'd ever sell it. The only way I would consider selling it, is in the state it's currently in. The intent is to make this a keeper, but it seems finding what I'm looking for is taking more time than I wanted it to.
That said, I'm pretty much set on keeping it, and focusing now on the body to get it all sorted.
The fabrication involved to fit a different motor isn't too big of a deal, and to actually do the work would be fun and enjoyable. The car will maintain its classic look, so from the exterior, no one will be able to differentiate it from another 170. It's just what's under the hood that may be different.
Now, these motors seem pretty simple, and ideally that would be the fastest way to get the car going again; how are these to rebuild? I know I can do it, and if the cost isn't all too great, I may consider doing just that. $5000 for an original running motor, while I can easily afford it, is not money well spent in my mind (a fool and his money are easily separated, so I pinch my pennies more than most).
I'd not thought of using the 636, it certainly would keep the original engine look, and perhaps be an easier install. I'm curious about that setup in Canada though.
I'll check it out! I need to pull it and inspect to see what the deal is.