First look for obvious problems, like a push rod through the side of the block. I'd make sure it could be turned by hand. Remove the valve cover and look for anything out of place in the valve train. You might catch a dropped valve, etc. which could mean big problems. Lots of oil down the side or wherever might not be a big deal, but if it used a lot of oil there's a chance that the P.O. might not have kept up on the consumption and ran it dry. Pull the dipstick and see what the oil looks like.
By all means, bring a tool box. Don't worry about offending the seller. It's your money so you need to make sure you're making the most informed decision.
No matter what questions you ask, you might not get an honest answer. Doesn't mean you shouldn't ask anyway. Ask him about oil consumption. Ask if it's ever been rebuilt, when the head was last redone, if there have been any problems with it. He may give you straight answers.
Best of luck to you. I'm sure some of the other guys here will chime in and offer some other really good advice, too.
