Thanks to everyone for the input so far. I posted a reply to Robot and Jerry earlier but it looks like the computer ate it.

I'll try to recap:
@robot: thanks for all of the detailed thoughts. My preference is to not spend a boat load of money right now. The idea of gaining OBD-II is just a "nice thing to have" while I'm considering pulling the engine out for possibly a new one. I'm leaning towards a rebuild...those GMPP crate engines look great, but I think that will be pushing it in the cost department, considering the idea that trans and/or drivetrain could still go kaboom at any point. Thanks also for the idea of having a pro look at the engine my mechanic's trying to sell me.

@Jerry & Glenn: Here goes: I started intermittently losing oil pressure, especially when idling. After a couple of days of that, I checked the oil, saw it was a little low, and topped it off. That seemed to fix it for a couple of days, but it started degrading again. It finally started a bad knocking sound that made me afraid of hitting the gas at all...oil pressure was dropping to zero, but with plenty of oil. Towed it into the shop the next morning, and on starting it, it was making an awful racket of knocking. Mechanic said that he recommended possibly changing out cam shaft or worst case changing out engine. A couple of days later he said that changing the master bearings might be necessary. Then his final word to me was that he didn't want to do all of that work and charge me 700-800 bucks only to face the possiblity that in a couple of months I might come back saying that my truck was broken again...he recommended just swapping out the engine with one that's already rebuilt.

Like I said, the truck was my grandfather's and I have to assume he took care of it while he was around. He did use it for a while towing a third wheel camper a few times per year, mostly in-state. Unfortunately, the truck sat around unused for 2 or 3 years between him using it and me getting it back in June and I know that's not good.

@Matt: The thing is, I told the mechanic that I wanted a 96 or newer 350 and he told me that the Vortec is what's in his truck, and it wouldn't work because "everything's different." I'm not questioning you in saying that it's not possible, I'm just wondering realistically how much work it's going to be and what type of traps I might be setting myself up for in the future.