So with the new forum and all, I'll recap my situation and my recent unfortunate findings in my 81 LTD engine to see if you guys have any advice...
I picked up a 1981 LTD 440 for $100 off craiglist a few months back. It sat outside for about 4 years straight so it needed a lot of work. I took out the motor and got to work on it. First thing I did was remove head and cylinders to inspect everything. There was some gunk and carbon buildup which I cleaned up and then replaced the cylinder base, head, and intake gaskets amongst a few other things. After that, I had some trouble with the carbs but got everything sorted out and last week I had the engine running. I was running on premix since I wasn't sure about oil pump, but did the output test and oil pump checked out. Also put water in the cooling system and confirmed the thermostat opens up water pump works. Everything was going great. That is until I noticed water seeping from the cylinder base gaskets on the exhaust side >..< Today, I took everything apart and couldn't believe what I found... pistons, on the intake side, were scored... the right one actually has a flat spot on it which you can even see in the picture below. Exhaust side looked alright; just some browning. Cylinders have slight scoring... there are a few spots I can feel with my fingernail... again, worse on that right hand side. I have no idea what caused this as I was running on 40:1 premix the whole time I was working on the engine and test running it.
Based on all this, what advice would you guys give me? I'm guessing pistons are beyond saving, but do I need new cylinders as well? Thanks in advance!