The issue with the owner only being willing to do a 203K for that property sounds odd, unless it is the only renovation loan that bank offers.
You're going to have trouble finding any bank that will finance you with a credit score lower than 650 - especially if it is much lower. (I think for most 620 is the bottom rung).
What you will have if you can sell your current home is irrevelant, unless it is under contract and even then anyone in this market knows not to count your chicken before they are hatched (in other words - HOPEFULLY the sale goes through).
Your offer of particular unique terms are irrevelvant, banks are unable to make very personalized deals... you must fit into a box they have.
So, shop around for lenders. Your real estate agent will be able to refer you - or you can go to my web site (look under service providers). I have fabulous lenders.
If you went ahead and did the 203K loan in the beginning, then try to convert it later to a conventional loan, that may work.
With your employment history and proof of funds, a lender would want to work with you.
I'm sure there are many loan brokers who can come up with different scenarios for you. I can give you the names of at least two independent and very reliable brokers and a Wells Fargo lender who can offer 203K loans and other options that may meet your needs.
It can't hurt to speak with these folks and see what they can do for you. Let me know if you'd like their names/contact numbers and I will be happy to give you that information.