£285 isn't too bad, or put it on eBay as a project vehicle someone will snap it up I'm sure
Haven't thought about keeping it as a small project? Do small bits at a time when you can afford them
I would imagine it failed the emissions because the head has gone, best bet would be to do a wet and dry pressure test to figure out which cylinder has failed.
Also if the brake ferrules and pipes are not severely deteriorated you can clean them up with a soft brass wire brush and then lubricate them with white grease. I do this at work on a regular basis to get vehicles through MOT