Varsity's were not great bikes even when new. They were 45 pounds of gas pipe with lowest possible grade of components that were constantly breaking and needing repair. Yet I've seen those bikes sell for $125 to $150, of course condition plays a lot into it. The reason these bikes are selling for so much is because the baby boomers were raised on them so now their trying to buy back their youthful memories. I'm a baby boomer, 59 years old, I remember those bikes quite well, I wouldn't pay more then $15 for one even if it's in great condition!! But that's me, there are people out there who will pay a lot more then that.
The size of the frame shouldn't be a problem, the size only takes away from the largest portion of the public who may want to buy the bike, in other words you shrink your marketed audience dramatically, but that shouldn't effect the price, if a tall baby boomer wants it, he'll buy it.