I would cram some chunky 33's on there, keep the tire pressure on the low side, and start wheeling.
With some miles and experience, you'll see what breaks and needs help. By then you'll have a better idea if this rusty $750 rig is something you want to continue with.
As for mods... wouldn't put any money into the TTB or 8.8 diff. (If it has the 9" rear, that's worth modding) These trucks have a good upgrade path as far as installing F250/350 parts, solid-axle swaps, etc. Hide the rust as best you can - at least initially - or cut it away for tire clearance.
Here's a solid-axle-swap thread for reference:
...although it may be more preferable to go 2005+ Superduty nowadays.