It sounds like your gunsmith is proposing building a new gun inside an old one. Honestly, this makes little sense - unless you ARE the Gunsmith.
If you are doing this because it is a hobby, GREAT! Go for it!
If not:
I have been hit in the face with bits of copper jacket while firing old guns, and I have seen the consequences of a person firing a second round on top of a squib round. I do not recommend the experience.
Don't take this the wrong way - I feel for you, really. My parents came to this country from a place where my father was not even ALLOWED to own firearms, let alone afford one.
I stand by what I said, unless you are tinkering with this gun purely for fun (in which case practical advice does not apply), don't hang on to it, and don't shoot it.
Even if you have the money to make the repairs needed now, it will most likely need more repairs later. Starting in this condition, it will never be completely reliable as a defensive weapon, or for sport.