Are you thinking about rebuilding the 6 banger, or putting a V8 in it?

 

I dont know what the 350 is going to look like on the inside because of the water that got into it.
What would be a good offer on this car if there is no rust or serious problems.

 

I almost always offer less, but take enough to pay the asking price if I really want the car. Don't want to go so low that you **** the seller off, but low enough for a counter that works. I'd offer $1500, and hope he'll counter around $1700. I would guess he wont take much less than the $1850 asking price though.
Make sure you've got cash in your pocket too! Telling him you've got the cash for a immediate sale will always give you more leverage than having to go get it. It lets the seller know you're serious.