That's a tough call Alex. I looked at your pics, and aside from the painted stripes I thought it looked pretty good until I saw the quarter panels and all the rust and bondo on there. I'm guessing those are in rough shape, and that's a tough sell since no one is making reproduction sheet metal except the areas adjacent to the wheel well. You also have a challenge since it's a bench seat/column shifter car.
My advice would be to first sand off those stripes and primer over the area. Badly painted stripes practically scream "This car has had a lot of half-assed work done on it!" to every potential buyer, and with a poorly-running engine to boot this image doesn't help you.

You're better off having primer there so you can say you removed the original stripes in preparation for repainting the car and did some cleaning up under where they were.
I wouldn't bother going to the time and expense to get a 360 and install it. 360s are in demand right now as upgrade engines for 318 and /6 cars, but most people are buying the engine to put it into something else, and aren't really interested in buying a car with one already in it. A more likely scenario would be someone buying your car with the intention of replacing the engine anyway. I think a better use of your time would be getting the interior as completed as possible. A nice interior will sell this car better than a 360 will.
Personally, I would rate this as a parts car due to the rust and where it's at, but I have seen people buying cars in much worse shape for $4k and more, so you could get that much. I think your best shot at getting it would be to use some Jedi mind tricks on the buyers, like in your local ads mention the car has a 318 in it but don't tell them it's not running very well. Whoever calls to inquire about the car is probably already interested in it, and when they ask how the engine runs you can say "to be honest, it doesn't run very good. Bad cylinder. I was going to have the engine rebuilt, but then I would have had to add a couple of grand to the price, plus most folks want a big block in there for more power anyway." These are the kinds of statements car dealers use to plant mental images in your head, in this case that you're paying less money and that they want a big block. Do this right and they won't care as much if the 318 is running or not because in their minds they're already thinking about junking the 318 for a big block.
Clean up the exterior, finish the interior, and play some mind games with the engine, and I think you could get your asking price and maybe a bit more.