Depends if you'd put a lot of work into the existing shell. If its got sorted suspension, brakes, bodywork, interior etc, then not only would you have to buy the S4, but you'd have to redo all the maintenance/upgrades on the new car.
I spent nearly 800quid putting another 1.8T engine into my avant. I could have simply sold it for spares and baught another 1.8T complete, however i know the suspension and brakes are all good on my car, bushes have been replaced and i've added some personal touches. At least this way, i know i've got a car thats mechanically sound, and while doing the engine swap i changed the timing belt, clutch and water pump, so i know those are all good going forward. The replacement car could quite easily have had tonnes of gremlins just waiting to bite me in the ****.
He also has to shift on his own car. If you consider that V6 Quattros will struggle to attain 2k, with very good ones perhaps making 1500-2000, not only would he have to have enough cash to buy the S4 outright, and await the sale of his old car, but an S4 is going to cost a minimum of 3500 for a ropey one thats needing some work, and the 2grand difference there would quite easily pay for an engine, and some new parts like the clutch and belts etc to fit the motor to his car.
You need to weigh up the costs and see where the numbers land. Personally i'd use a V8 motor over a biturbo, but i guess it depends if your happy with an effective "cieling" of 340hp, or want to go wild on a biturbo motor to get 4-500hp.