I go along with streets on this one - but i think $500 is more what a bone yard will want. If you want to daily driver it, stay with 75 and newer (hardened valve seats for unleaded gas). If you want more oomph, then while the motor is out get some cast iron vortec heads and intake ($700 or so). This stays with in your budget, lets you see in side the motor, and the vortec heads and an alum intake (with proper head gasket for 9 or 9.5 compression) gets you about the best you can have. you can put in a decent cam too, for another $100.

Modding a high-er mileage motor used bto be a no-no, but seems to be much more common these days, and unless you go nuts (nitrous, blower, etc) you should be fine.