As per Zane Kesey:

Here is the fuller story.
Hagen had millionaire friends that said they would restore it, turns out they wanted it given to them.
Yes, the Smithsonian asked for the original bus, but said they would never have room to display it. They never mentioned restoring, in fact said it would stay as is. They came out to look at it, dad said no they couldn't put it in a box by the Arc of The Covenent hidden forever and gave them a spare tire and a huge Acid Test banner instead. 
At this point dad was liking the idea of a bus again
His publisher was getting ready to print The Further Inquiry and dad wanted the book to have a feature where when you flip through the pages you get to witness Cassady movies and his wild movements. They said this would be impossible and too expensive and jokingly said they would do it if dad brought the bus to the Las Vegas Booksellers convention...and dad said OK !!!
On the way home we saw a 1947 International bus for sale in Eugene with a similar front end. We spent months preparing it. It was ready in record time. 
The local News came out and filmed the new bus looking great. Later that night the news said "Ken Kesey has restored the original bus and is taking it to the Smithsonian Museum"...WTF? We would need to call them to straighten them out. BUT in the morning we got calls from Walter Cronkite, Rolling Stones, High Times, Etc ....ALL of them wanting to to send reporters to join the "historic last trip"....!!!??!!

The media created this Prank, so dad allowed the prank to be on them. The prank was not on the Smithsonian at all, it was on the media. We loaded the bus with a bunch of Original Pranksters, and big time reporters and headed ...not to the East, but to California for the book tour for Further Inquiry. This went on for weeks, the media wandering when we would head east, and us trying not to pop this bubble.
Me and Hagen and Swan filmed all of this for dad to make a movie called "Furthur On"
In Stockton, the last stop of the tour the younger generation (as planned) kidnapped the bus while everyone was at the event. We left a chalk outline where the bus was and wrote Nothing Lasts. We drove the bus to a cattle loading dock and started painting it grey/blue like a church bus with temporary (hopefully) paint. The police showed up mid paint!!! OH NO... here we are with a bus that was planned to be reported as stolen re-painting it to disguise it.
In the end all was good, the bus was parked in Chucks woods and the paint washed off. The movie was edited and someday may be re-released on youtube. The bus went on to have many more trips with dad and the Pranksters, even across the Atlantic.

And the media... they never admitted they were pranked...every one of them reported that the prank was on the museum.