To me, the biggest difficulties with getting a Lunar-Orbiting Space Station are twofold.
One: Getting it there. The Saturn V could manage about 47,000 Kg to TLI and with minor modifications, a little over 50,000 Kg to TLI is quite reasonable. This by my math, allows up to 34,000 Kg for the station itself (with an assumed Isp of 441s for the LOI stage with reserve for lunar impact once its job is done) should the Dry Workshop design be selected. While the USSR proved that a little over 20,000 Kg was enough for the job, this was only for LEO and not permanently stationed, as such, building it out of two or three sections is the most likely outcome here.
Two: Lumpy Lunar Gravitational Field. It is at that. So you first need to find an orbit that is stable for LLO to minimise the propellant usage for station-keeping requirements. Otherwise, you're going to be spending a lot of time and money just keeping it there by this one measure alone.
This is not to say it's impossible, but without the precise Political Environment to enable the funding to be made available, it's essentially DOA.
So to make it happen, you really need to have the USSR really perform well during the 2nd half of the Space Race, and that is a massive can of butterflies when you consider the economic and political conditions of the late-1960's USSR. Not to mention their oft-spotty Quality Control.