For $5000, you'd be able to do all sorts of upgrades on your car! LT1, 4-pots, AND shocks.

$800 I picked up a wrecked '97 LT1, even came with a T56 to put into my streetcar.
$100 Power Steering Pump work
$100 Fuel lines
$200 exhaust rework
$300 valve springs, gaskets, a/c delete pulley and misc stuff. TPI oil pan swaps right over.
So for $1500, I dropped in the LT1. That's about what it costs to get a typical SBC rebuilt. I still havn't sold off the TPI yet, but can get a few hundred back from that. After my first few years running CMC1 at ~209hp, I was already expecting/wanting/bugeting to do a rebuild since I hadn't had any major failures so far.

$400 for spare LT1 longblock plus tin on CL

I'll agree that you NEED close to the 260hp to be competitive with comparable drivers. I doubt that if I got big brakes and AST's tomorrow, I'd be dicing it up with Mosty/Proctor/Dan. I like to think that if Wirtz or Burch campained my car as is sat pre-NOLA, it'd be on the podium each weekend.

I understand everyone's threshold for "how much is too much" is different. I have my racing budget, works out to be $1000 per race weekend, and $500 in maint/repairs/upgrades per year. It's difficult to do an entire season on much less than that. No major breakages in the first 3 years let me do the LT1 upgrade. No major breakages the next year let me upgrade to a T2R. Engine blow'd up this year means next upgade (brakes maybe?) gets kicked further down the road. If you don't have at least $500 set aside in your racing budget for maint/repairs per year, you're in the wrong hobby.