+1 Rebuild and keep. This looks like a really nice car.
Frankly, someone will beat you up on your price knowing the car needs a rebuild and I doubt you'll get your money out of it if you decide to rebuild and sell it right away. With the prices going they way they are going on air-cooled 911s, I think time is on your side unless you have to sell it for personal reasons.
It doesn't appear you drive the car much... maybe it just needs an Italian tune and some hard miles to help the #2 compression. This link may help.
http://forums.pelicanparts.com/porsche-911-technical-forum/266919-1987-carrera-failed-compression-test.html