Be careful about redoing the valves. They are allegedly Stellite coated, and once you go through the Stellite, they are quite soft. That assumes they really are coated. But the factory manual claims they are, so We'll have to take their word for it.
You can return the engine to the frame several ways. The traditional way is to horse it in with the frame upright on the stand. It helps to have a strong friend or at least a good meal a few hours before. You can cover the freshly painted frame tubes with strips of corrugated cardboard taped in place to avoid nicks and scrapes, and pull them afterwards.
I redid quite a few XS650s years ago, and ended up laying the rebuilt engine on the right side on the floor, then tipping over the frame and bolting the engine in while everything was on the right hand side lying down. Then you just pick the bike up and you're done. Obviously, the tank and battery are off during this so you don't spill stuff. You don't need to get all of the engine bolts in while on the side, but enough that it won't shift. Most Yamahas have the bolts go in from the left side with the nut/lockwasher/washer on the right. Most Yamahas are set up to pull the engine from the right and reinstall it on that side as well. Put some grease on the mounting bolts where they go inside the engine castings so they won't corrode while enclosed in there.
As for overhauls: Look down the plug holes with a very bright light, look at the valve faces where they contact the seats. Looking into the intake port will show oil leakage past the stem seals. Same for ring ridge in cylinder. If I went so far as to re-ring, I'd rebore. But seeing the age of these bikes, I'd say that you should probably at least replace the valve stem rubber seals. There's a fixture that you screw into the plug hole, attach an air line from a compressor to, and that holds the valve shut while you pull the keeper and spring without pulling the head. But I think if I were going to that length, I'd at least pull the head and do it right. Then you can check it all. The age of these bikes is the problem, not the miles. There are no good 30+ year old seals in engines of any type. The proper fix is to replace them, not spray "miracle goo #14" on everything and hope for the best. The other problem is that oils have drastically improved since these bikes were new, so today wear is minimal, where years ago, engines were pretty ratty by 20-30K miles.
Good luck.
