I do believe that has got to be the nastiest motor I have ever seen!
I'm not sure if it would be economical to rebuild it. The aluminum head would clean up fine but to replace the valves/springs guides and all the other stuff affected by rust would likely cost more than buying a new complete head. The cylinder and piston appear wasted. The rust most likely has corroded the sleave beyond repair. May want to consider a top end kit. For that matter, you can find new complete motors for less than $300.
When parts costs start excedeing more than a couple of hundred bucks, as this one probaly will, it's can be more economical to simply replace it, unless you are looking for a challenge and want to learn with it. There's nothing wrong with taking that path.