RESTO Advice please. Rebuild 787 top end?


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So, i bought a 97 challenger for $500 and after replacing the starter solenoid much to my surprise it turned over with the start button. It did not start and i really didn't expect it to. The guy i bought it from swears the engine was rebuilt. I did put water to it to check for leaks and lo and behold the pro side jug had a huge crack in. Probably freeze damage as both jugs seem a little, um, inflated, swollen, not sure how to describe it, but they just don't look right. So i have questions and need advice. There was water and oil in the bottom end and i vacuumed it out as best i could. Crank shaft seems to rotate fine and i really don't see any rust on it. On the mag side of the i take manifold there was a bunch of oil as well.

So my questions:

1.Would anything else cause water to be in the crankcase?

2. If so, would that be an indicator that i should give up on this engine and build another one?

3. What would cause oil on the mag side of the intake and what should i do to correct it?

4. If i rebuild the top end what sneaky little problems should i be on guard for?

I'll have more questions I'm sure but these are a starting point. Please advise.