It sounds to me like a MASSIVE air leak in the bottom end. If you've got good compression your piston/sleeve is probably still good, but you've probably got a really bad leak in the bottom end. I'm saying this because when it does run it runs very fast with a closed carb, and it won't stay running.

Remove the engine from the car, attach a piece of fuel tube about 10" long to the fuel inlet on the carb, and blow. Air should come out the carb. Plug the carb with your finger and blow again. You should hear an air leak from somewhere: front bearing, the base of the carb, or the back plate. Seal them up with RTV sealer, but make sure the RTV sealer you're using is resistant to Nitro fuel. Obviously you're not going to use RTV on the front bearing, so at that point you've got to decide if you want a new engine for $90 or repair your old one for $??? and the time investment. If you've got the VX-18 (purple cooling head) it's not worth rebuilding. Get the SH-18 from the link in my signature or look around for an engine at your local hobby shop.

If the engine doesn't leak air from the carb, front bearing, or back plate, try plugging the carb inlet and the outlet of the pipe/muffler, and blow again. (Whenever I remove my engine I tend to leave the header & pipe connected to it, so I'm imagining you doing it the same way) If you've got a bad exhaust leak, it's probably between the header and the head. If this gasket is leaking, you can get a package of gaskets for cheap or build your own out of automotive stuff - I've done both. Don't just use RTV here because it won't last. If you've got a leak in your exhaust, you might not be able to pump fuel into the carb and the engine will run lean or not run at all.

Then turning around, look at your fuel tank. There will be one hose from the pipe to the tank lid, and one hose from the tank body to the carb. Plug the one to the carb and blow into the one from the pipe, and you shouldn't get any leaks here either. If you do, you'll probably want to replace the tank or the hoses or both. It's important that you don't have any fuel or air leaks.