Don't know how much of a case there is, but i didn't get through all 9 pages. Did the owner advertise that the engine installed was the correct engine for the bike? In all honesty, i'm sure he thought he purchased a good replacement engine, realized it wasn't correct, and then instead of going back and fixing it correctly, he just found a way to make that engine work...When you're buying a used, as-is vehicle, if nothing has been specifically drawn out, i'd doubt you'd have much recourse. I had a 79' Honda CM before my SV, i was apparently the third or forth owner of the bike, and there was no history revealed to me prior to purchasing the bike besides that it ran, looked "legit" had a clean title.
I don't believe the State of Missouri would have cared if the engine in the motorcycle came from another 79' Honda, an SV, or a Bell Helicopter. As long as the numbers on the frame matched the numbers on the title, the engine was of no regard (less it was stolen i'd imagine).
I have one car that has a non-factory engine in it as well, and it's of no concern. Granted, i know where the motor was installed from, and have documentation proving this, but that information isn't going to be found on any title, emissions forms, or carfax history that you'd pull.
I wish you the best of luck in your quest. My guess, ride the bike if you feel comfortable. If you're feeling vibrations that don't seem normal, or if the mounting makes you feel uncomfortable, don't ride it. Scout the net for a replacement motor if you plan on keeping the bike. After all this, you'll have more into the bike than you're going to get out of it by selling, but at least you wouldn't be opening yourself up to being unethical in the sale of the bike.