I hope Matt Hutson pops his head in here to reply.
He was part of the effort to repaint #268 a few years back.
Unless I am mistaken, there are "issues" involving ownership of the 268 which will absolutely keep any discussion restoration of this engine off the table for the foreseeable future. Not issues of who owns the engine, but what is to be done with it under the current scenario. It will not leave Gunnison, and it will not be restored. End of story.
As to it's condition, it is possibly in pretty good condition, unless some moron used to burn tires and trash in the firebox to make "smoke" as was done in #60 over a period of several years. But mechanically, it ought to be in decent shape. Certainly better than several other display engines.