I would definitely put the effort and money towards getting that saw in good running condition and look past the potential mis-representation of the saw. You have a very nice, very desirable 262 in otherwise great condition. A lot of guys would sell their soul to have that saw, myself included.
I agree with the advice to get the saw pressure/vac tested for insurance and install a new piston and ring. Seals probably wouldn't be a bad idea either considering the age of the saw.
Dropped the saw off today to be tested, hopefully hear from the doctor tomorrow. It could turn out that it is exactly how he said, a strong runner with good compression, fingers crossed.