First thing I do to any motor on inspection (if you cant hear it run) is grab the harmonic balancer and pull in and out. This will tell you the condition of the main thrust bearing. If it moves in and out noticable stay away!! Next you can check cranking compression. Look for even numbers (+/- 5psi) across all 8 cylinders.
External rust isnt a major concern as long as the fasteners are able to be turned. $200 is a great price on a nice 5.0. Are you planning on going EFI or carbed?
Yea, theres a yard of all fox bodies a town away from me, the guy has high mileage and low milege engines in there.
A buddy i work with father knows the owner, so ill be lucky and get a nice one for ~ 200.