I have been rescuing bikes from basements, or unhappy owners for years, occasionally from a bike shop owner who calls me about someone wanting a more modern bike. And I have put a lot of thought into this very question.
First, it has to be a worthwhile bike. Next it has to be a bike I like. I want to be able to look at it and imagine how happy with it I'll be in the end.
Next, I realize that by the time all factors are considered I may well put more time and money into the bike than a similar one could be purchased for in original shape. This brings up the question of how available the model being considered is.
Also you can usually get started for a small amount of money and finish it as you have the extra cash. This is sometimes easier than laying out a large lump some for a bike not in need of restoration.
As long is it is fun for me to do it, I am fine. For me where I start having regrets is when I have several restoration projects going at once and it becomes more like work than play. It seems it is in these situations that I usually make the dreaded mistakes and false starts that end up with me buying or acquiring parts that are not what will really go best on the bike or perhaps will even fit on the bike. This is about the worst of it and it can be expensive .
By the time you acquire the parts (think some real money here), make sure everything is prepped and aligned and the decals arranged (not as easy as one might think in many cases. Thanks to the Internet the entire world can be searched for them now) and the bike goes into paint I often run to a year, sometimes as much as three years to get such a bike on the road.
It then looks great, but I usually have no idea of the ride quality until I get it together and if it does not ride like I want, I usually put it up for sale. At that point, there is always some wag who takes delight in pointing out that the bike is not original. Of course, he is right.
In the end, the only answer as to how far to take such a project is this: only as far as it is fun and enjoyable for you . Other than saving a nice old bike from the dumpster (and you could always give it away or sell it) there is little reason to go through all this other than your own personal enjoyment. If you don't get that out of it, you should avoid it like the Plague.
Tom Sanders
Lansing, MI USA