Sounds like it is shot.. dump the 235 and put in a 283, they dont need oil pressure.
My opinion on this, weak as it might be, is that there is air in the oil pressure gage line.... when the actual engine oil pressure drops below the pressure of the air in the gage line, it equals out and the gage pressure drops to or near zero... the engine should still be getting some oil to it, otherwise it would sieze up...
