I don't think you're looking at a good deal. Used motors are too risky, even when they're guaranteed, and rebuilt motors can easily exceed $7500 to buy, ship, and install.
Add to that the $1000 that you'll likely need to repair the suspension (at 120K the shocks and springs are gone), the drive shaft, various odds and ends you mentioned and you're looking at north of $10,000 for a car that's worth roughly $7,500-$8,000.
It would be cheaper and (oh so much) easier to buy a Disco that's in good running condition. Be sure to have it checked by an LR specialist beforehand. If a running '04 is out of your budget, look at the '99-'02 models. They're mostly the same cars and can be had in great shape for under $4,000.
All that said, what do you mean by "the engine is blown"? Does it run at all? What is the previous owner telling you?