I will try another gauge to just be sure.
If your current guage is mechanical, don't get your hopes up. You absolutely should check the pressure with a 2nd gauge, but don't expect much difference.
How extensive of a rebuild should I preform.
What you need to do is have a machine shop check the crankshaft, they can tell you if it is worn out enough to need to be turned undersize to get back to a smooth, round shape. Sometimes, you get lucky and the crank journals are in very good shape and you can simply install new bearings. But unless you are a machinist with the knowledge of what to look for and how to measure it, you'll be taking the crank to a machine shop.
What you're going to need to do is get new main, rod and cam bearings in it. That involves the aforementioned crank measuring and either polishing or machining. Depending upon the condition of the camshaft, you may need to replace it.
The problem with only doing that is that it's insane. Pulling the engine out and disassembling it and only fixing the oil pressure related issues is crazy. While you're in there, now is the time to fix the oil consumption issues (pistons, rings, bores, etc.). Now is the time to vat the engine and have it cleaned and detail it. Now is the time to replace all the freeze plugs. Now is the time to replace the oil pump.
I completely understand budgetary constraints: I have a project that's been sitting for a year with no movement because I just don't have the $5K to rebuild/replace the engine with a new one. But I'm not going to reassemble the vehicle with a worn out engine so it'll sit until I make enough money to do it right or I luck into a deal on an engine.
Also, since rebuilding is not a viable option at the moment, could any damage be caused by continuing to run the engine.
If the pressure is really that low, then you aren't getting enough pressure to "float" the crank (google hydrodynamic wedge). At best, you score the heck out of the crank journals. At worst, it spins a bearing and ruins the crank and the block.
