Hate to say it but-
It Looks rusty and crusty. Could Deep Creep (blue in color if I remember right) have washed the 2 stroke oil away and caused it to rust the bore? Not familiar with it.
I agree with Spare, if the crank is rusty, move on. There should have been some head gaskets when the heads came off. Those heads look to be pitted, if it was into recently someone might have tried to silicone the pitting.
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1996 -19' NV Flats 115 Mercury 4-stroke
1983 -20' Wellcraft Center Console 250 XS
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