Very nice! Do grampa proud and restore it to great running rig and it will be a great legacy to pass on to your grandchild.
Since you are in Indiana and are going to replace the body, I think going fiberglass is a no brainer. You are not doing a lot of rocks so not so worried about body damage and you avoid the salt / rust issue altogether. Most people "bed line" the inside to work around the rust issue but with fiberglass you don't need to. You can, should work just fine, but then it is more of a preference than anything.
Fuel inject the 304. I did it to mine and all I can tell you is WOW what a difference. I went the JY route and it turned out great. Do the JeepHammer ignition + the MSD and you have a winning combination. Open up the exhaust a bit and you will have more than enough power for a CJ5.
Looks like you have some really long shackles up front, I would trade those out for the proper springs for the lift you want.
Beyond that, the rest really depends on the kind of wheeling you do.
Good Luck and welcome to the madness!
With a great Jeep comes an empty wallet.