The configure script didn't find Guile because AC_PATH_PROG
interprets "guile" as an argument of "scsh" and discards it.
AC_PATH_PROGS does the right thing:

--- lsh-0.1.15/configure.in.orig        Sun Nov  7 20:53:34 1999
+++ lsh-0.1.15/configure.in     Thu Nov 18 09:15:50 1999
@@ -125,7 +125,7 @@
 if test x$with_scheme != x ; then
   AC_PATH_PROG(SCHEME_PROGRAM, $with_scheme,, $PATH)
 else  
-  AC_PATH_PROG(SCHEME_PROGRAM, scsh guile,, $PATH)
+  AC_PATH_PROGS(SCHEME_PROGRAM, scsh guile,, $PATH)
 fi
 
 if test x$SCHEME_PROGRAM = x ; then

Also, I don't think the $PATH is required.
But it doesn't hurt either, so I didn't try my luck.

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