buying a toy to fix up is no different than buying an assembled kit to fix up. They call them Wreck-scue on AAMB forum.
Don Stauffer
This is very similar to modifying die cast models (sold already assembled). I have seen such models entered in contests and no one complained that I am aware of. Just refinishing might not be enough, but when they are extensively modified like the OP did, I think it qualifies.
i don't mind diecasts, as they usually have subjects not done by plastics manuf. they have an annoying habit of sticking all together in the box. Sometimes they almost look finished, like someone had a try at assembling it.