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2007 3dr Focus ST performance blue
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70 Posts
Lubricate the pistons and turn the engine few times (maybe with power tools) and see if that surface rust will clean. It should be fine if its just surface rust. Redo the head, since you had issues with the gasket you might need to skim it a bit. Consider a thicker head gasket if you did last year as well.
 

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2007 3dr Focus ST performance blue
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70 Posts
By the state of the engine it must have sat over an year or it had poor coolant in it.
As stated before, coat the engine with some oil or something like fogging oil/wd40 and turn the engine several times. Ideal would be to use some sort of a power tool to be efficient. With medium lubrification you should use the rings to scrape the liners.
Honing its going to take very little from the surface and will leave behind a finish pattern that will retain oil while reboring is taking a bit more material, probably 0.25mm in total diameter. I would say is to little to make a real difference in terms of liner resistance. But its going to be costly as it requires new pistons and rings.
Either of this choices are done after you (or a machine shop) will inspect the block really well. Just make sure you have a decent budget for rebuild and at least some sort of understanding about what is happening there.

Its hard to tell from the pictures how bad the rust is but try to spin the engine as told and see what you left with.
 

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2007 3dr Focus ST performance blue
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70 Posts
Its matched with the crank shaft ladder. Its safe to use another head or sump if you will have to. Equally important to not change is the camshaft cover as its matched to the head.
 
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