I would argue that having non-working heater channels is a sign of a bad restoration and when evaluating a car its a sign for me that there's a problem in that area.
In terms of supplying and fitting an engine I'm not sure who'd suit best but in general terms there's Cosy Classics, Emilio's Beetles and Caddy (his username on this forum) who has a very impressive setup for rebuilding VW aircooled engines.
Other posters will probably have other recommendations, especially in the midlands but its a start. Hugo may have a few ideas too.