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Alright, so got the engine completely disassembled and this is what I found out.
1. The head gaskets on both sides were cracked in the middle.
2. Previous owner had stripped the bolt that holds the alternator to the head, and instead of trying to get it out, he drilled it through and went too far (Maybe causing leakage or cracking?).
3. There are a few heavy scratches in 3 of the cylinders.

Im going to replace the heads, and possibly the manifold and carburetor too. Hoping to keep the pistons but I will have too wait and see what my machine shop recommends.

Where would I get the biggest bang for my buck on those parts? SummitRacing?

p.s. I apologize if the images are too large.