bad news for my 3SGTE engine (56K ouchie), NOW UPDATED WITH THE NEW PLAN!!! Options

[presure2]

well, looks like i have a worse case senario on my hands at this point.
removed the head on the 3s ive been working on, first thing i noticed was TONS of carbon..tops of the pistons are coated with it, its so heavy is actually flaking off.
next i had a look at the cylinder walls..and i discovered this:

needless to say, the wife can feel it with her fingernail, and from what ive read, that = time for the machine shop.
which absolutly blows.
i had no intention of "building" this motor, as my power goals (~250WHP) really do not warrant it, and i really wanted to try and get it in ASAP.
so, now im at a crossroad....do i say to hell with it, and buy forged rods and pistons over the next several months, and slowly over the next year or so build the motor, and then start the headwork...(cause IMO its kinda pointless to put a factory head on a built block) which could take ANOTHER year with MY budget!...lol OR
another option at this point is a factory short block..i can get one new for as little as 1450$ or so to my door.
have the head rebuilt (~600) and start new...
OR
at this point, im fairly confident in the 5s block, we know the weak point is pistons and rods..and hell, im pretty close to my power goal as it is with the 5sfTe..im starting to think that for my power level, i could build the 5s to take the beating pretty easily for the next few years..especially if i spent a little more time on tuning, or stepped up and bought the emanage or somthing...
thoughts? ideas? comments?
help me out here, guys, im kinda bummed out about this whole thing.

[madmods]

I would have to say the plan on keeping you 5 and little by little working on the 3 when time and money permits. You have a fast motor already. Take your time, little money here and there on the 3. If it takes
2 years, let it be. If you pull your 5 motor out, you got down time on your baby. Enjoy your 5, don't push it
too hard. I would die to have that motor.