...they tell me my only choice is to title this as a kit car...Does this mean that, due to my neglect in making sure the VIN tag was replaced and my brother's changing the engine without updating the title with the new number has completely denuded this wonderful truck of its value.
Depends what you mean by "value".
It sounds to me you're more interested in the sentimental value of the truck being in the family. In that case it matters not what kind of title it has.
Additionally, when you drive the truck, take it to shows, have friends over to look at it or work on it, no one can tell the difference.
If you are concerned about
resale value, then you probably will lose some money when the time comes. As previously suggested, bring it home to AZ and sell it there with the current legal title.
