Sludge under valve cover 20V Blacktop, is this a bad sign Options

[onnaj]

Hello,

I bought myself a 20V Blacktop yesterday and today we decided to strip the engine and take the cam cover off.
Under the cam cover we saw sludge sludge and sludge all over. The bearings and cams seems to be okay, but i'm afraid to take the head off
What do you guys think? Return the engine or just check the bottom and when there's no damage to the pistons, rings, cylinders, etc keep the engine?
The oil filter looks very clear, so that could mean two things. 1) The bottom is good and no sludge over there or 2) (I don't hope so) the oil passage is blocked.

Well...here are the pics:

Engine complete:


Cam cover itself:


Underneath the cam cover:








Tomorrow we are going to put the starter and brackter back on and check compression. I think this is possible isn't it? Valves are closed now and inlet/outlet is open and plugs are out. Should've done that right away. before stripping it :S

[richee3]

I'd either take Smaay's advice and tear the engine down, or return it if you can. However, when buying a performance engine like a Blacktop, odds are it has seen some abuse and tearing it down is always the smartest choice.