Having been in the insurance industry in the past and dealing with salvaged vehicles, they are made salvage vehicles for a reason, usually meaning that it would cost more to repair them to the condition they were in just prior to the loss. The owner generally has the option to buy the car back and it appears to me that they declined to exercise this option, and probably for good reason. While a flooded vehicle physically appears to be just fine, there are way too many things that can go wrong internally that one cannot see.

Do you have details on what constituted it being considered "flood" damage? Was the car totally submerged or was it stuck in an underpass or something similar that resulted in only partial flooding? These are things that you need to discuss with your insurance agency, but generally once a vehicle is damaged and an insurance claim is filed, it goes into a national database and the information is readily accessible and can be picked up by places like CarFax.

Having said all of this, I am in consensus with the general opinion. Only you and your father can really make the decision on whether or not it is worth the risk. While I understand that you have fallen in love with the car, is it really worth dealing with a possible bag of snakes or a can of worms?