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Mark has put very valuable info already, once that stage is satisfied you also need to check the gearbox functionality and more importantly find a new gearbox that mates with the new engine. This way it's lot easier to swap the engine and gearbox at one shot and get the car moving on its own asap. In scrapyard you usually get these two both joined together so no more extra hunting or headache. Even if you don't use the new gearbox buy it and keep it handy as more than likely you will need it soon to replace or get the donor parts.

This definitely seems like a lots and lots of work and something require true passion, love, time, money and great resources for sourcing parts that can bring this oldie to life again. Instead of finding a problem with engine, I would suggest to plonk another motor that seems to fit in that engine bay. Older engines in general are bigger in size so the newer model let's 90's or 2000's engine might fit in with little modification and custom made adapters. You should start your research in closest matching engine in terms of size and orientation and then find a capable turning guys who can design the mounts and adapters especially the flywheel part. Once you have these two fall in its place rest everything else will follow sooner or later. Good luck and have fun, take lot of pictures.