Like brokenhead said, the rusty oil passages need to be looked into, really. It looks like that engine is probably very low mileage, 50,000 maybe, but that may have been 50 years ago.

For me, it's far too nice an engine to "see what happens". Inline sixes are anvil tough and reliable as the sun, but rod and main bearings still need oil. Wait and go though it before running it. It should be an easy rebuild and a great engine after that. JMHO

Some of my crap:
1963 C-30 flatbed dually 292/SM420
1965 C-10 LWB fleet 250/column shift 3 speed
1965 C-30 9' stepside 250/SM420/4.10 gears (my DD)

Website I made for my crap:
http://www.66submarine.com