M8 burn down
That engine is just fine! The proof is in your pictures. Here's the facts.
#1. It burned down because it was running lean and for quit some time. As to why it was running lean, I don't know, you'll have to figure that out.
#2. As for the metal missing, don't assume pieces were breaking off. When it runs lean for extended period of time, it slowly melts away. Where does it go? Right out you exchaust port. That whole area melted away is exposed to the large exchaust port twice a revolution, once going up and once going down. The incoming air/ fuel charge will blast the melted metal out the exhaust.
#3. There's no evidence any metal got into crankcase area. It would have to get past the bottom ring. For a chunck to get in there, there would have to be a deep vertical groove for it to pass between the piston and cylinder wall. All you have is smearing like most typical burn downs.
#4. Metal or piston pieces in crankcase, come from broken piston skirts. I did not see broken skirt in you pictures.
#5. The head looks pretty good. When a rod bearing goes out or pieces of the skirt break off, they get blasted up through the intake ports. Every time the piston hits TDC, it smashes the pieces against the head. Top of piston and the head will be full of dents. Again, no evidence of metal in that motor.
#6. What's it worth? I have no idea! You'll have to figure that out. I can only comment on what it would cost me for a piston kit, top end gaskets, and a new jugh.
#7. Like the other guys said, it's a excellent motor, never heard anything bad about it. That wasn't the motors fault
#8. The most important one. You have to figure out what caused this so it don't happen again. Took me 3 times in one season to figure out what was
causing mine!

. Buy it, fix it, ride it. Happy sledding.