Hi Frank, you should see the body and paint on my S2. It may be even worse than what yours looks like. Stress cracks take a lot of work to repair but they are repairable. Personally, on a project car, body work would be the last item that I would tackle.
On my project S2, it took me several years, but the mechanical work is complete enough that I've driven it several hundred miles. I'm at the point now where I have to decide what to do about the body and paint. With a car in road worthy condition, I've broadened my options on where to go with this car. I can start on the body restoration myself or sell it as a running Europa and let some one else finish up the restoration. My point is not to be concerned about the paint at this time.
Your car, from what I can tell, appears to a good one for restoration. Get it up and running first. I've attached a picture of what my S2 looks like now. The picture does not show how bad the paint is.