I've said this before on another thread - if you got the car for under 15K, you can presume it requires 'something' or has a salvage title. If you got it for under 12K, you can presume it needs something major. This isn't guesswork. It's the facts. I hear the pain in your posts, but a car like this should NEVER be purchased without having an authorized mechanic - or someone with significant mechanical experience - review the car in detail and also drive the car. In fact that can be said for ANY car purchase - not just the RS6.
As for parting it out - BLASPHEMY! It's simply senseless to do such when a repair can make it near new. I have a car here with double that mileage and I could have parted it out simply because it had a bad turbo and other small odds and sods, but I elected to bite the bullet and put in the parts necessary to ensure the 1 of 860 survives. Lots of other examples that have met their fate due to accidents - no need to add another simply because you don't deem it worthy of your money. Sell it to someone who will keep it going.
Oh - and if it hasn't been said enough already above - DON'T bastardize the car with the piddly 2.7 just because. All of the Audi powerplants can be built to make more power. Buildingn a 2.7 isn't going to have any less problems than a 4.2. You limitation on the extent of your build is $$ and limited space in certain areas in the C5 chassis. You will also find that irrespective of how much $$ you put in to a 2.7 engine, you will have killed all resale value of the car. If you want to do this, go blow your wad on an A6 or S6 and bolt on some cosmetic bumpers, seats, and the like. Then you might actually recognize some of your work. You will get bent over doing what you're suggesting to an RS6.
Just sayin.