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1. Is there still an opportunity to walk away? (This is why I would never buy an older Airstream without bringing along a drill, a rivet gun, and some rivets)
2. If not, it can be restored.
3. While a "new" frame may save you welding time, I would think it would more than be made up in stripping the inside entirely, removing all the inner walls, partitions, and aluminum skins so that the shell can be lifted off the frame. (But I've never done it before, so I can't speak to how easy or hard it may be.)
4. I tend to believe that in the hands of the right welder, the frame can be restored to where it will give the necessary support where it needs to. (These 70s units started out with light frames to begin with, as the shell provides so much of the support.)
5. You still have a really nice shell (right?) with a center bath floor plan (which is nice).
6. If it were me, I would immobilize it and put it up on 8-12 blocks (kinda like a ship in drydock) so the axles could be dropped and you could access every square inch of the frame. (Drop the fresh water tank as well, as you'll probably find some more issues there as well.) Then, I would take a wire wheel to the whole thing to determine what is salvageable and what isn't. (I would take a pointy hammer to suspected weak areas to determine strength.) I would paint it with a good rust paint (POR 15 or the like) and then start my frame restoration/repair.
Some spots will require more, some less, but a welder familiar with structural things can probably help you out a bit. (I'd be careful about adding too much additional weight, though.)
Better yet, buy yourself a mig welder for a couple hundred bucks and you'll be an expert when you're finished! (You'll have more than paid for the welder and you'll still have it in your possession when you're through.)
Now, keep in mind that I'm a pizza maker, first and foremost, so I'm sure my advice has its pros and cons, but this is essentially what I did with my Sovereign, which, like your Ambassador, looked like it had lived at the beach all its life. I ran into way more rust on it than my first one, all I could do was deal with it.
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