Well its hard to judge the value without pics or further info on condition haha, but to me it sounds like a good deal, an 87' Iroc 5-speed is starting to become a pretty penny these days, lots of people preffer the 5-speeds over the 350s since you cant get the 350s in anything but Auto, and for most thats not a good trade off, so if it's in good condition and just needs some hardware TLC then totally go for it man...as for your LS swap, first off great idea i had the same
maybe check out the LS454 also its a beast for just 2 grand more off Jegs, also a 5-speed is a great place to begin for a swap like that, now a few things to keep in mind, first if it is a T-top car be very careful to brace the frame before hand since T-top cars are VERY prone to bending the frame at even mediocre power levels, aside from that just know that the T56 is a bit longer than the T5 and there will be some slight cutting and re-placing involved to get the shifter to fit through the console area, the rest should be typical restomodding, changing brackets, computers, etc.
Me personally? Id totally go for it, just keep those tips in mind and let it be a project car. Id love to do the same thing actually but i would probly stick with an LS1 or something simple just to keep the car a nice cruiser/hot rod and drive it regularly, maybe not every day but much more than weekend-cruiser status.