On the Photo's bit, it could be that the images you are trying to upload are too big? They've got to be below a certain size I think. Might need to use the computer to squash them down? I'm definitely keen to see some more of this car and what's happened to it.
I have done A LOT of rust repairs on my car Richie and i'm not panel beater, it is quite easy and you learn so much when doing it. I'd definitely recommend the Mig that I have, another guy on the forum here bought one also Its a Lincoln 180c. Quite cheap and really versatile. Mine has definitely paid for itself, 8 years on its still going strong! I have a TIG now also, but for speed and ease of use, the Mig wins hands down. It also puts less heat into the job, which is exactly what you want for car panels. If you have a look on my Member's ride post in the link in my Signature, you'll see all the rust repairs I did were basically exactly where you are describing. I also tried to show how i did them, so hopefully it'll help you out?
Where In Australia are you? There might be some guy's who can have a look and offer suggestions?
In terms of the motor, you can still bore out an L18 pretty big. It really does depend on your budget as to how crazy you go, but with decent headwork and a few other components, you can make quite a strong and snappy L18 that'll rev quite well.
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Ongoing Project: 1972 Datsun 510 S13 SR20Det.
http://ozdat.com/forum/viewtopic.php?f=33&t=17898
New Daily: D22 Navara (The new workhorse)
Retired 12/2016: MY98 Subaru Impreza RX
Previous Car: Restored Green 1972 Datsun 510, Hot L18