OK, here's the bike that I ended up scoring for $1,000. Had to drive over 300 miles to pick it up though.
It sat in a motorcylce repair shop for over 25 years and has less than 13,000 miles on it. A true "barn find".
As you can see from the handlebars, this is the Cruiser model (called "Special"), but the reason I bought it, if you look at the rear wheel, is that it has rear disc brakes. A rarity on the XS 650. It also has provisions for twin front discs which would give it awesome stopping power, a necessity for racing use.
So all it needs is a different seat, different handlebars, different wheels (spoke wheels that are lighter) a race fairing and a paint job.
I also plan to give the engine a big bore kit. I found a 750cc kit for sale, but I hear rumor that 900cc kits exist and I'd go for one of those.
It looks a bit ugly now, but it will be a kick-ass Cafe Racer here in a few months.
BTW, thanks to PPK for taking the picture.