I don't want to piss in your Wheaties, but that thing might be toast. Did you crack open a few rod caps to see what the crank looks like? I would like to know how much/how far the water damage goes. Kind of a worst case scenario but hopefully the crank doesn't need turned, hopefully rod bushings are ok, and hopefully a machine shop can acid dip it and get the oil rifles clean too. Like others have said, money ahead just to get another short block. I would rather rebuild one with spun bearings than a rusty cylinder(s).