I agree there is a good chance the hydro didn't happen to have failed completely at the exact moment the engine did Deejay. The problem is it seems like he'd have to spend money and do some work on the engine transplant, without knowing whether the transmission was on its last legs. Here's a horror story for you: what if the old engine threw the rod because of over-revving due to transmission slippage?
On the other hand, if the engine blew because there was no oil in it (which is why most of them throw rods) the transmission might have years of life left in it. If I were Rosco I wouldn't invest a lot of time in this project without having either a way to test the transmission, or a backup plan in case it's trash. If it had a mechanical transmission it would be different: he'd probably be able to get parts or cobble some kind of solution. Is it possible to substitute a mechanical transmission for the hydro?