Welcome to CHR! Sounds like a great project, and that picture looks like the truck is in pretty good shape for the start. I'm one of those Ford in Ford guys, so I vote for grabbing that 302 from your buddy, or looking at some of the 302/331/347 crate engines you can get out there. Check Ford Racing Parts for a start. The Tremec five speed, TKO500 or 600 depending on how much you push your engine build, is a great choice for what you're wanting. You can pick up a used T5 cheap, but too many of them see hard duty and are "grenades waiting to explode" IMO. The flathead is very cool, and gets you lots of points from the purists, but when you start looking at towing across the state at 70+ I'd wonder about the reliability long term. Plus you'll spend two to three times what you spend on the 302 and top out at about 225 to 250hp/200ftlbs torque if it's the big flathead. Just look at the prices of a flathead "crate" from someone like H&H for comparison - $10K and up and you've got maybe a 50/50 chance that your block will be good since they're susceptible to cracking. Fatman is good stuff!

Lots of good build advice from experienced guys on here, and you can pick up a ton of tips on "how to" by reading through some build threads, especially for working metal. Hope we see you here through the build, and that you like to take pictures as you go.