So I got to their house to do a diagnostic. When I pulled off the engine cover, all the gold block paint on the cylinder heads was a charred brown. Not good. Melted wire across the top of #1. Melted and collapsed water hose on the bottom of #1/3 side. Decided to do a compression test before going further: 60/65/85/65. Not good. This gauge on my motor gives 130+/hole, and 90 on my little 2hp.
Pulled off the head on #1&3 and bores don't look too bad - smooth with only one scored area on #1. No evidence of ring fragments. Pulled bypass cover on #1 and the top ring is there but has no tension (high ring piston). Both rings were free. Heads are high-compression, pre head-mounted coil style.
Buttoned it back up as a 'bad news' situation. A motor this old with such low compression might be worth re-building if you knew the rest was good (gearcase etc), but since they bought it without a test run or a mechanical inspection, I can't suggest putting any money in it.
I suggested if they were looking for another boat they should invite me along to inspect it before they lay money down. I think that even running as it is, it might make 50hp.