yeah, I would keep looking. The price sounds great, except for the rust. I would avoid one that has too many holes. mine was 3700, though I think i paid too much for it by about 500$. It was rust free but needed timing belt and o2. it was mint condition, looks to have been garaged. I had good luck with the discount o2 sensor for the vx.
a whole used drivers side door can be found for $100, so they must have been really cheap to spend all that time cuting and welding the old one.
Also, if the paint is bubbling already, then it is most likely doing so over rust that was simply painted over, so what you have is basicly a low miles civic vx engine in an extreamly rusty body, if it was $1,000 I would say to get it and drive it for a few years, then drop the engine in something with a better body when this one falls appart.