Ask the guy if he would sell the car to you, and in the end this could be the best outcome. No bickering over engine price. I would do that first and not even offer selling the motor. In todays economy, who knows what might happen if you ask.
If you try to sell it, figure on a 10% min value gain. You are talking a safe 4K. He should not argue with that a all, if he does, he does not want the original engine anyways. offer to split the difference (win win). So add atleast 2-3K to the engine, beyond its core value as a nice Z29 motor with a nice date code.
If you find out the car has no documentation, you do in a sense vindicate the car, so again, 2K premium sounds reasonable to request.
If you can't make a deal, just part ways nicely, and ask him for atleast a shot at the car if it ever comes up forsale.