You're facing several options.
Least expensive option: keep the 8x57 chambering (it's very close in performance to a 30-06, and cheap ammo is available) and replace the rear sight. It should be possible to find an original or reproduction rear sight to replace the one that's gone, but since it's already been altered I'd think a better choice to attain a basic hunting rifle or "fun gun" is spending just under $100 for a Mojo sight - a peep sight that takes the place of the original rear sight and is mounted on the barrel, not the receiver:
www.mojosights.comRelatively inexpensive option: I have a very good condition military 7x57 barrel you can have for cheap. You'll still have to pay somewhere in the neighborhood of $150+ for a gunsmith to swap the barrels, plus ??? for adding front and rear sights. You'll also probably want a trigger job and modifying the follower so the action doesn't lock open after the last shot. If you want to scope it, prices go up quickly. Just drilling and tapping the receiver for a scope base can cost $40+ per hole - and then you have to modify the bolt so it won't hit the scope. Now you're talking about spending enough to buy a Ruger American - a rifle that will be much lighter, much more accurate and come with a factory warranty.
If you're willing to spend in the vicinity of $2000+ to build up a rifle from your sporterized Mauser, that's a possible route. You need to realize that about all you will save from what you're starting with is the bare action - and if you're going to spend that kind of dough you need to consider that the action you have may not even be the best action for a custom rifle. There are lots of opinions out there about which actions are the most suitable for a custom build (my gunsmith really likes the 1909 Argentine), and you'll have to spend some time talking to experienced gunsmiths.
You can certainly buy an excellent NEW rifle for that amount of money - plus you get to keep the old Mauser as a fun gun!
