I just bought a 1980 vette with a new ZZ4 crate engine installed...  I live in Japan and they have restrictions on changing engine displacement.  Basically they have bands and you can change change within those bands so you can't replace a 5.7L 350CID with a big block large displacement etc...  So engine choice was limited, but the exhaust, transmission and engine combination made for one awesome machine...  Now I have to restore the interior and cleanup the body...  no damage just showing some of its age...  still nice though for a 28 year old car...

It really depends upon your goals and budget...  If you want a monster car you will never really drive it...  If you want a driver you won't want to go overboard...

I recommend, for the drivable classic, keep it conservative.  Replace the tired engine with a newer one, like my ZZ4 which has around 400hp, so you have MORE than enough to feel the rush, but keep it simple and straight forward...  Save the bucks and you can use them to update the suspension to modern technology that will result in a better ride too...  Remember you can always get tri-power or dual-quads for the ZZ4 at reasonable prices if you ever want to take it to the next level... 3 duces at 250CFM each or 2 quads at 500CFM each...  you can also add a Procharger pretty easy for that (drop the compression a bit first) and you could have a 1000hp (or more) Vette for about 10K worth of engine tuning...

Rough numbers,
ZZ4 engine complete (6,500)
tri-power or dual-quad kit for ZZ4 (2,500) - (dual-quad is cheaper than tri-power)
Procharger intercooled SC setup (4,000)

The above prices are estimates based on MSRP from my research.  Labor may be more or less depending upon your do-it-yourself capabilities and the prices can often be found reduced at given outlets...

If you use a fuel injected engine you will need a great deal more cost in the engine management equipment etc. required...

Nice looking Vette.  I have 1981 with 109.000 miles.  Plan to keep it as stock as possible.