Welcome to CHR!

As mentioned in the posts above, $500 will not go real far. The exhaust and brakes are a priority from a safety standpoint. You should be able to get decent dual exhaust and brake tune up for that sum and as Jerry mentioned, save a chunk and start planning what you'd like to build. A takeout - as Roger suggests - might be a good point of departure to build from. My guess is that you’ve got the most common combination for a 1989 C2500 - a stock 210 horsepower 350 with a 700R4 transmission. Nothing wrong with that and 160,000 miles is not atypical of these rigs. If it’s not leaking or blowing big clouds of blue smoke it may run for a good long time as a daily driver allowing you to plan and save. In the event you decide to do a wrecking yard engine/transmission you could haul it home, build the engine exactly as you want it and then take the truck out of commission only for the swap.

We not trying to tell you what you "can't do" but most here have a lot of real world experience in building vehicles and engines. It would appear that this is your first project and we’ve all been there and remember how we wanted to build one to the max first thing without considering the cost in time and money.

Go to your local book store (or amazon.com) and buy a couple books on SBC builds. Read them and then read them again. Start to gather tools that are called out in the books and remember that if you’re going to use them for a lifetime, buy quality tools (some of my hand tools are 65+ years old); however, if you’re only going to use them once you don’t have to buy the best and most expensive – e.g. Harbor Freight engine stands are just fine for all but hardcore engine builders.

Keep us in the loop!
Glenn