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I think my biggest concern with a stock tank would be the chance of cavitation. You would be well served to weld some baffling underneath/around the fuel pickup to ensure that you will always be sucking fuel and not some air if your fuel level is low and/or your fuel sloshes in corners.
Is that $1200 for a shortblock or longblock? If it's a longblock, that's a STEAL. If its a shortblock that needs a rebuild, its not a bad price, especially if it will just need rings. There are some deals out there. I bought a 15K mile 6.1 shortblock off one of the forums for $800 plus $150...