2.7 rebuild or replace
 

My 77 has been sitting for about 9 years. Only driven for a few weeks 4 years ago. I stored it when we had twins. Running when stored, had a slight oil drip.

I am looking at getting it running again and looking for opinions.

1- Should I drive it as is, with oil leak and whatever new leaks are going to be there due o it sitting

2- "rebuild" the motor. Basically just take it apart and new seals and only replace NEEDED parts

3- start looking for a larger (3.0 - 3.6?) conversion?

What conditions was it stored in? Climate, moisture, etc?

Edit: I would change the oil, and give the engine a good once-over and run it. Short of a full rebuild you may want to pop the fan out and make sure there aren't mice nesting on top of the engine inside the shroud. That would be a small amount of work to make sure you don't completely ruin a runner.

Hopefully you've got the distributor problem fixed. The 2.7's big issue is pulled head studs. If they are still good, replace gaskets and seal as needed, clean and adjust the CIS and enjoy it. Later engines comes with their own potential problems with CIS, DME, broken dilivar studs, plus unknown history. The 2.7 running well is still a lot of fun. If the current running problems you have are with the fuel tank and lines, or CDI ignition will still exist if you swap engines.
If your budget is high, which I would think is not the case with 3 young kids, then consider a different engine along with the realization that a few thousand may also be needed to replace head studs, valve guides, etc. that happen to later 3.0, 3.2, engines. I spent about $5.600. for a 'good running' 1986 3.2 and transmission. That 'good running' engine needed another $3,000. for the head work to replace valve guides, exhaust valves, and new piston rings. Fortunately Nikasil and not Alusil cylinders. That was with me doing all the work and just paying the shop to do the valve guides. Toss in the cost of a new clutch, installing a DME and wiring harness if a 3.2, and assorted fittings and hoses for the fuel lines needed for the 3.2 engine. Prices have changed a bit since I bought the 3.2, and now I think you will pay $5,000+ just for the engine and DME.
I loved the more powerful engine, but I am back to the original 2.4 engine and still have a lot of fun driving it. You don't need huge amounts of horsepower to enjoy driving a Porsche on the street. If I tracked the car, maybe. I did recoup some of the money when I sold the rebuilt 3.2, but nowhere near what I spent.

I would take a look around to see if there are any intruders in the shroud, change the oil and give it a run. Pay attention to how it's running prior to really stretching her legs...

As I am sure you are aware, the second that engine comes out, it becomes a very slippery (expensive) slope tearing it down and rebuilding/upgrading it.