I once bought a Saito 80 that was badly oxidised on the outside, but like new inside. I took it all apart, and packed the ccase and cylinder with rags and taped up all the openings. I had the bearings out also.
Then I bead blasted the entire exterior, and it looked like new. Use fine grade glass beads in a table top cabinet, you know the ones they sell for about $125 US or so?
If you buy a lot of old engines and fix them up, you will love the glass bead cabinet - and use it a lot, trust me.
AJC
PS that Saito is flying in one of my planes now, and no one even knows its not stock, looks like the diecast finish.