Re: Pistons look corroded and damaged
Do not buy pistons until you're sure what oversize you will need and while you're taking apart, try to find where the water was getting in. Let the machine shop tell you the size and make sure they know what pistons you're buying. Make sure the shop routinely does outboard blocks, BC they are not the same as auto stuff. You may well have to ship the block for the machine work.
Also, inspect the crank journals very carefully. If it needs replacement, you may want to rethink rebuilding, since cranks are VERY expensive.
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it's been a very expensive lesson for me so far, never buy a used engine without some sort of paperwork history. The engine is in fairness 25 years old, so I'm not sure if it has ever had a major overhaul done on it. Servicing yes, but what does hta tmena more than sparks chaged, oil checked and some basic stuff besides. I'm not even sure it ever had a tune up, as all parts look fairly old.
Some points of note are:
1. The engine always ran well when running, never above 30 knots, but it wasn't weak in any way.
2. The Telltail was always strong, never hot and always there...
3. It didn't idle very well, but I thought that was compression related.
4. I replaced the sparks recently but they became black and fouled very quickly, and I thought I seen what looked like water in the SB Cylinder - so I began suspecting leakage somewhere.
5. There was a black smoke coming from the exhaust while running fresh water thruto flush at home, but never any white smoke that I remember, but I might have missed it... could have been there, and I missed it.
6. It is a thirsty engine, but the boat is not that heavy, so I would have thought better fuel consumption with the more powerful engine, wrong - it ate the fuel - but again, this could be compression related. It's pushing an SSV-167 Galstron Shallow-V, electric start engine.
I can't really think of any other things I noticed with it... but I knew it needed the overhaul.
To be honest, I'm glad I'm doing this as it means at least "I" know what has been done and what condition it will be in.
The cost can be spread over time, I'm not in a mad hurry to fix her and get out again just for the sake of it.
I want it done right, and part of me knows that a big part of the repair on this engine will be done in shop - but again, since most of the work will already be done, I don't mind that.
So long as when it's done, and rebuilt, the engine is like new.

(fat chance, but sure, once can dream)
I'll post a couple more pix for more advice once I have gotten down to the crank and everything else checked.
The Porosity is something I will check for sure, to id where leaks are coming from, also, in fairness, the Gaskets were actually intact, not damage to them no cracks, tears or wear, but they look very old.
We'll see what's needed and if it costs the grand for the crank to be replaced, well so be it, better than spending 10k that I don't have on a new engine.
cheers for the advice so far.