UPDATE 04/11/09: Got a little shop time this morning. The goal was start cleaning up the block, put the new timing chain on, and degree the cam. However, when we pulled the cam sprocket for the timing chain off, we found this:
Whoever built the engine, neglected to put the thrust washer on behind the cam sprocket. The sprocket has chewed into the block over 1/8". And because the cam wasn't in snug, the lifters are unevenly worn and a couple of cam lobes in the rear are flattening. Additionally, several of my pushrods are flexing. What does all this really mean? I need to rebuild the engine and get the block machined to fix the damage. Not something I had wanted to do right now, and definaltely something that was not budgeted for this year. It was one of those days, where I wish I had stayed home.