When the engine is getting on its last days, it will get real hot real quick no matter what the needle settings are at, stall and won't restart until it has cooled down due to losing compression. There will be no resistance when turning the flywheel by hand.
As far as if the engine is worth rebuilding or not, it depends on what the engine is and the condition the rest of it is in (crank, bearings, rod, carb). If it is a $100 engine and the piston and sleeve cost $75, you would be better off with a new engine for the extra $25.