So I went and picked up this engine from a car enthusiast for my CJ5 and here is the tear down and diagnosis.
The engine was out of a Waggy with an auto. It was said to have been running when pulled but I had my doubts.
Fast forward a few days and I had it on the engine stand and the engine apart. Timing cover is cracked but I got a spare from my 304. Yikes! Heavy carbon and sludge build up but the engine was still in great shape.
Once the oil pan was off I saw one cylinder with some scoring but the rest were nice and clean with no piston movement in the cylinders. No shavings or chunks in the oil pan so I was a happy camper.