Rlah,
Tell us about the size of your house, the layout of the basement and the air flow moving to the areas you'd want heated, and whether or not you spend alot of time near the stove.
Then share with us what you could reasonably budget for a serious investment in wood heat (i.e. something that would cut your heating bills by 50%, how much would you pay for that).
Here's my thoughts: that stove is bunk, that piping is bunk, and that chimney is bunk. You'll spend hours of time and possibly $100-200 to get that thing closer to code, and you'll still struggle with it drafting properly or pumping out significant heat.
You can do this on the cheap, especially if you are as handy as you sound. You get an el-cheapo plate steel stove sized properly for your house (the guys on here will help direct you, but the cheapest I've seen that I would buy would be around $500-600 new, but that's also for a smaller house). Then you buy QUALITY stove pipe to angle into that wall and insulated chimney liner running up the chimney. You can re-use that cap.
You can probably move to an EPA stove, insulated liner, and install everything yourself for $1500 or less and you'll get up to $500 back in a tax credit (IIRC). So you might be looking at a $1000 investment.
For that, you'll get enough heat to keep the stove area very toasty and probably a good amount of the upstairs semi-warm. If you and the Mrs. is willing to put up with a bit more chill this winter, you turn down the heat to 65 (or, if you are like me, 60-63 during waking hours and 55 at night).
gotta feed the stove of course, but looks like you are all set there.
This is a serious investment in time and energy. If you think you can work side jobs that would pay you enough to heat your house, it's going to be more efficient use of time vs. dollars. I mark my time as worth $30-40 an hour (personal time value to me). I probably spend 100 hours chopping, stacking, moving wood, and watching the fire....so about $3000-4000 PER YEAR in personal time spent saving ~$1500 a year in heating oil costs. And frankly, the house is less evenly heated and not as well heated if I just used straight oil heat.
But i enjoy it. If you do too, and you have the desire, then it's very rewarding. But go into it knowing what you are doing