I have restored many VW's of that era. I would use a 20w50 high mileage type oil. Blown main seals are a common occurance and require engine removal to replace. Leaking push rod tube seals and oil cooler seals are also an unwelcome frequent headache. I believe that the "high mileage" types of oil have additives that will hopefully soften up your 43 year old seals.
I cannot begin to tell you how many blown up bug motors that I have personally seen in 13 years in the bug biz. Number 3 runs hot and usually destroys the crankshaft journal and rod bearing when the clueless owner runs the motor low on oil. It only holds 2 3/4 qt. to begin with and has loose tolerances since it is air cooled so they DO use oil. The girl that is going to drive the car needs to have it drilled into her head to check the oil at EVERY fill-up.
I do not know what a type 1 motor overhaul goes for these days,but I think it must be in the neighborhood of $1,500...had one chick fill the engine with oil until it was literally full-til it came out of the oil cap! LOL!!