You've done good so far, you have it running. You need to properly time the engine. The drip tube is very inexpensive and allows you to do an adequate job of properly timing the time of delivery.

Don't take the engine apart for exploratory surgery until you have done a compression check. The blowby is definitely a bad sign, but don't condemn the engine until you set the timing properly and do a compression check. I think there is a possibility that if you set the timing properly and drive the car some, it could free up stuck rings. Several hot drain oil changes at about 100 mile intervals might free them up.

Unfortunately there is really no such thing as a cheap overhaul on these engines. Pistons cost about $150 each plus boring of the cylinders, the crank will probably be okay, but you will need new bearings, and don't even think about taking it apart without doing a valve job with new guides for $350 or more. I just can't imagine overhauling this engine for any amount near as low as $1,000. I have a 617 apart and have more than $1,000 or so in the short block alone, and that is with a good crankshaft that doesn't need turning.

Sorry to deliver all this bad news.

Best of luck,