7.7 was brought in for problems.
Wouldn't run for more than 5 minutes, figured the motor was bad.

When I went to run it, it'll start and run for about 10 seconds, and when it goes to an idle it jumps up and down.
Like bahh bahh bahh bahh bahh
Running temps were 160.

It started about 5 times, now I can't even get the thing to start.
The glow plug is good, it's getting fuel, and it seems to have some strong compression.
Glow ingnitor is good, tried a different fuel, tried a different glow plug.

The threads for the glow plug seem to be cross threaded, and when I removed the head you can see blowback around the block. I'm guessing it was an air leak, but am uncertain as to why it wouldn't start.

And as I look, the sleeve inside the block has play.
My question is: Is this normal?
I've been working for the hobby shop for 3 years and have never seen this, nor have I dealt with CEN.

And if this is normal, then what could the problem be?