Steve, I live in the East Bay of San Francisco.
With regards to the frame, I was thinking that i could save the front 1/3 of the sandcast frame and have it welded on to the back 2/3 of the K0 frame. If I did this, I would have to cut the lower 2 tubes of the frame under the engine, then cut the main tube and the two side tubes above the engine. Then do the same to the K0 frame. I would reinforce the welds by putting in a internal tube to bridge the welds. Then sand it down till the seams flush. Does that seam like a plausible plan?
The reason i asked, there are a number of different approaches one can take when considering best decisions for restoring a frame in this condition. I am assuming you have made a commitment to this frame, an even though cost for repair is a concern, in your mind you're prepared to learn all the considerations to bring this frame back. I admire and respect your desire to restore this frame; know all things are possible. Be prepared to network as much as is necessary to help you decide the approach you ultimately take. My advice is take your time, in your locale, there must be individuals who do frame repair work and/or find a good welder/repairer (i believe you said welding is not one of your strengths - nor mine). Part of your preparation for deciding what your approach will be is to get familiar with the nuances and distinctions of frame 2568 in contrast to earlier and later vin ranges of sandcast frames as compare to early and late K0 frames -and- later frames. (i would say research of this forum, posting pics, asking questions and also being on the
www.sohc4.net forum will be helpful to you.) A project such as this will take time, much more so in the research process and parts acquisition process and determining the repair approach process. Knowing up front this is not a project for anyone short on patience, persistence, perseverance, and willingness to learn what is necessary to make the frame right is 9/10th's the battle. You may want to put this link in your files -
http://www.wascoframe.com/ These guy are premier frame restorers, at least in the antique motorcycle fellowship. They repair any/all frames. The value, increasing desirability and difficulty finding these sandcast bikes is at the point, parts we would have not considered restoring, saving, repairing are now parts we evaluate from a different perspective. if your frame were mine, i would learn what is necessary to know about the frame, find donor parts/frames, and go from there. in my experience, you very most likely are going to need donor parts. the other thing, is making sure the frame is straight, plumb and true after the repairs have been effected. hope this is helpful.
PS - your approach is certainly one i would consider. to me, it sounds like a good one.