You for sure want an exhaust system, no use starting it up if you can't hear what it sounds like when running.
My break-in stand has an electric fuel pump that sucks fuel from a five gallon plastic can, if the engine has a mechanical fuel pump, I just move the hose from electric pump to mechanical pump, it has plenty of suction to pull fuel up a hose, no need to lift the jug up. My fuel hose is about five feet long, long enough to get the fuel out away from hot headers.
For cooling an engine, hook up a garden hose to the lower water pump inlet with a long hose on the thermostat outlet, then vary the water flow according to how hot the water is coming out as the engine is running. I have run engines for 20 minutes using the water hose method. Its best to do it outside as your floor and feet will get wet.
Even if you need to have a short section of pipe bent and flared for the manifold, it's well worth it, you also need to add a muffler. If you are tearing it down for a rebuild, don't bother starting it, there's no point, if it turns over easy, it most likely will start, that's all you need to know.
If you are not rebuilding it, then starting it will have benefits, but you must be able to hear the engine, not the open exhaust. My test stand has four mufflers, two 3" stainless steel race mufflers, then two smaller quiter mufflers with " tail pipes " to get the noisy as far away as possible. Once it's broke-in and all the tuning is done, I pull the smaller mufflers off so the customers can her the engine run on the deep tone race mufflers.
You can always use the parts to break-in the engine if you rebuild it.
I break-in all engines outside, away from the garage. No need risking a fire in the garage if you don't have to. I've had plenty of fireballs out the carbs to know not to stand over them, plus the fumes will give you a terrible headache. Even out side, I have a fire extinguisher, wet towel, and a garden hose near by. Years ago I had a car catch fire due to open headers and spilled fuel, after that I take no chances. Lucky my mom was watering flowers at the time and we were able to run enough water on it to get the fire out with only a burnt wire harness and some near by grass.
