Sorry to see this thread. I kind of yelled out when I saw the rod.
I sort of had a similar issue with my 73' 2002 Tii in the Fall of 2012. IT just kind of "popped" and smoked. I turned it off, and it ended up having some piston slap. I had a ring failure from overheating with mild warping of the head. My dad bought the car new in 1973. He tried to sell the car to me for 10K as is. I laughed at him and he gave it to me because I promised to rebuild it.
And rebuild it I did. Top and bottom end rebuild. Resurfaced head, new valves, seats, cam. overbored cylinders with new pistons, new bearings on bottom end and rods (bottom end was good). New oil pump (mine was fine, but just in case...). 100% new cooling system. Refreshed and uprated suspension, rebuilt original MFI that we kept all these years (It had dual webber 40's prior... the MFI rebuild was a big expense due to tuning and having to send it to the other coast for rebuild), partial interior restoration. Then I went wild with a LSD, brake refresh, air/fuel sensor, new fuel pump (expensive also), and many less sexy mechanical fixes and refreshes. The cosmetics were mostly untouched, but the engine bay was repainted "while we were in there" (As you ca imagine I did a lot of that, but I figure it should be good another 40 years).
Here I am enjoying the hell out of it and "getting my money's worth"
can't resist
Was it wort it? HELL YES. Was it expensive? HELL YES.
Your car does not have the emotional attachment. If it was me I would swap in a 3.6. Bank 20K for the engine and getting it properly installed. Bank another 10K for the other upgrades in suspension in brakes that you will want to make it a safer and balanced car.
Mind you, for 30K, you can get a solid running 3.2. That is what I paid for mine and it had 47K miles. Selling what you have will help cover those costs by 10, maybe 15 grand. Part out what you can of the engine. A replacement engine is probably ~10K and the most sensible approach. Be careful where you get it though...